81_FR_38132 81 FR 38020 - Expatriate Health Plans, Expatriate Health Plan Issuers, and Qualified Expatriates; Excepted Benefits; Lifetime and Annual Limits; and Short-Term, Limited-Duration Insurance

81 FR 38020 - Expatriate Health Plans, Expatriate Health Plan Issuers, and Qualified Expatriates; Excepted Benefits; Lifetime and Annual Limits; and Short-Term, Limited-Duration Insurance

DEPARTMENT OF THE TREASURY
Internal Revenue Service
DEPARTMENT OF LABOR
Employee Benefits Security Administration
DEPARTMENT OF HEALTH AND HUMAN SERVICES

Federal Register Volume 81, Issue 112 (June 10, 2016)

Page Range38020-38048
FR Document2016-13583

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.

Federal Register, Volume 81 Issue 112 (Friday, June 10, 2016)
[Federal Register Volume 81, Number 112 (Friday, June 10, 2016)]
[Proposed Rules]
[Pages 38020-38048]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-13583]



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Vol. 81

Friday,

No. 112

June 10, 2016

Part VI





Department of the Treasury





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 Internal Revenue Service





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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: http://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 (http://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.
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    \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 http://www.dol.gov/ebsa/pdf/faq-aca13.pdf and http://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).
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    \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).
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    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.
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    \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.
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    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 http://www.dol.gov/ebsa/faqs/faq-aca11.html and http://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 http://www.dol.gov/ebsa/regs/fab2007-4.html); CMS Insurance 
Standards Bulletin 08-01 (available at http://www.cms.gov/CCIIO/Resources/Files/Downloads/hipaa_08_01_508.pdf); and IRS Notice 2008-
23 (available at http://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 http://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)).
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    \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.
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    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.
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    \29\ 45 CFR 153.400(a)(1)(iii).
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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.
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    \30\ 26 CFR 57.2(h)(4).
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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).
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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.
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    \34\ See e.g., Mathews, Anna W. ``Sales of Short-Term Health 
Policies Surge,'' The Wall Street Journal April 10, 2016, available 
at http://www.wsj.com/articles/sales-of-short-term-health-policies-surge-1460328539.
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    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 http://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 http://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



                                                      38020                     Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules

                                                      DEPARTMENT OF THE TREASURY                              amend a reference in the final                         Jacob Ackerman of the Centers for
                                                                                                              regulations relating to prohibitions on                Medicare & Medicaid Services,
                                                      Internal Revenue Service                                lifetime and annual dollar limits and                  Department of Health and Human
                                                                                                              proposes to require that a notice be                   Services, at 301–492–4179. Concerning
                                                      26 CFR Parts 1, 46, 54, 57, and 301                     provided in connection with hospital                   the submission of comments or to
                                                      [REG–135702–15]                                         indemnity and other fixed indemnity                    request a public hearing, Regina
                                                                                                              insurance in the group health insurance                Johnson. (202) 317–6901 (not toll-free
                                                      RIN 1545–BN44                                           market for it to be considered excepted                numbers).
                                                                                                              benefits.                                                Customer Service Information:
                                                      DEPARTMENT OF LABOR                                                                                            Individuals interested in obtaining
                                                                                                              DATES: Comments are due on or before
                                                                                                              August 9, 2016.                                        information from the Department of
                                                      Employee Benefits Security                                                                                     Labor concerning employment-based
                                                                                                              ADDRESSES: Comments, identified by
                                                      Administration                                                                                                 health coverage laws may call the EBSA
                                                                                                              ‘‘Expatriate Health Plans and other
                                                                                                                                                                     Toll-Free Hotline, at 1–866–444–EBSA
                                                      29 CFR Part 2590                                        issues,’’ may be submitted by one of the
                                                                                                                                                                     (3272) or visit the Department of Labor’s
                                                                                                              following methods:
                                                      RIN 1210–AB75                                              Hand delivery or mail: Written                      Web site (http://www.dol.gov/ebsa). In
                                                                                                              comment submissions may be submitted                   addition, information from HHS on
                                                      DEPARTMENT OF HEALTH AND                                to CC:PA:LPD:PR (REG–135702–15),                       private health insurance for consumers
                                                      HUMAN SERVICES                                          Internal Revenue Service, P.O. Box                     can be found on the Centers for
                                                                                                                                                                     Medicare & Medicaid Services (CMS)
                                                                                                              7604, Ben Franklin Station, Washington,
                                                      45 CFR Parts 144, 146, 147, 148, and                                                                           Web site (www.cms.gov/cciio) and
                                                                                                              DC 20044. Comment submissions may
                                                      158                                                                                                            information on health reform can be
                                                                                                              be hand-delivered Monday through
                                                                                                                                                                     found at www.HealthCare.gov.
                                                      [CMS–9932–P]                                            Friday between the hours of 8 a.m. and
                                                                                                              4 p.m. to CC:PA:LPD:PR (REG–135702–                    SUPPLEMENTARY INFORMATION:
                                                      RIN 0938–AS93                                           15).                                                   I. Background
                                                                                                                 Federal eRulemaking Portal: http://
                                                      Expatriate Health Plans, Expatriate                                                                               This document contains proposed
                                                                                                              www.regulations.gov. Follow the
                                                      Health Plan Issuers, and Qualified                                                                             amendments to Department of the
                                                                                                              instructions for submitting comments.
                                                      Expatriates; Excepted Benefits;                            Comments received will be posted                    Treasury (Treasury Department)
                                                      Lifetime and Annual Limits; and Short-                                                                         regulations at 26 CFR part 1 (Income
                                                                                                              without change to www.regulations.gov
                                                      Term, Limited-Duration Insurance                                                                               taxes), 26 CFR part 46 (Excise taxes,
                                                                                                              and available for public inspection. Any
                                                                                                                                                                     Health care, Health insurance, Pensions,
                                                      AGENCY:  Internal Revenue Service,                      comment that is submitted will be
                                                                                                                                                                     Reporting and recordkeeping
                                                      Department of the Treasury; Employee                    shared with the Department of Labor
                                                                                                                                                                     requirements), 26 CFR part 54 (Pension
                                                      Benefits Security Administration,                       (DOL) and Department of Health and
                                                                                                                                                                     and excise taxes), 26 CFR part 57
                                                      Department of Labor; Centers for                        Human Services (HHS). Warning: Do
                                                                                                                                                                     (Health insurance providers fee), and 26
                                                      Medicare & Medicaid Services,                           not include any personally identifiable
                                                                                                                                                                     CFR part 301 (relating to procedure and
                                                      Department of Health and Human                          information (such as name, address, or
                                                                                                                                                                     administration) to implement the rules
                                                      Services.                                               other contact information) or
                                                                                                                                                                     for expatriate health plans, expatriate
                                                      ACTION: Proposed rule.
                                                                                                              confidential business information that                 health plan issuers, and qualified
                                                                                                              you do not want publicly disclosed. All                expatriates under the Expatriate Health
                                                      SUMMARY:   This document contains                       comments may be posted on the Internet                 Coverage Clarification Act of 2014
                                                      proposed regulations on the rules for                   and can be retrieved by most Internet                  (EHCCA), which was enacted as
                                                      expatriate health plans, expatriate                     search engines. No deletions,                          Division M of the Consolidated and
                                                      health plan issuers, and qualified                      modifications, or redactions will be                   Further Continuing Appropriations Act,
                                                      expatriates under the Expatriate Health                 made to the comments received, as they                 2015, Public Law 113–235 (128 Stat.
                                                      Coverage Clarification Act of 2014                      are public records.                                    2130). This document also contains
                                                      (EHCCA). This document also includes                    FOR FURTHER INFORMATION CONTACT:                       proposed amendments to DOL
                                                      proposed conforming amendments to                       Concerning the proposed regulations,                   regulations at 29 CFR part 2590 and
                                                      certain regulations to implement the                    with respect to the treatment of                       HHS regulations at 45 CFR part 147,
                                                      provisions of the EHCCA. Further, this                  expatriate health plan coverage as                     which are substantively identical to the
                                                      document proposes standards for travel                  minimum essential coverage under                       amendments to 26 CFR part 54.
                                                      insurance and supplemental health                       section 5000A of the Internal Revenue                     The EHCCA generally provides that
                                                      insurance coverage to be considered                     Code, John Lovelace, at 202–317–7006;                  the requirements of the Affordable Care
                                                      excepted benefits and revisions to the                  with respect to the provisions relating to             Act 1 (ACA) do not apply with respect
                                                      definition of short-term, limited-                      the health insurance providers fee                     to expatriate health plans, expatriate
                                                      duration insurance for purposes of the                  imposed by section 9010 of the                         health insurance issuers for coverage
                                                      exclusion from the definition of                        Affordable Care Act, Rachel Smith, at                  under expatriate health plans, and
                                                      individual health insurance coverage.                   202–317–6855; with respect to the                      employers in their capacity as plan
                                                      These proposed regulations affect                       definition of expatriate health plans,                 sponsors of expatriate health plans,
asabaliauskas on DSK3SPTVN1PROD with PROPOSALS




                                                      expatriates with health coverage under                  expatriate health insurance issuers, and               except that: (1) An expatriate health
                                                      expatriate health plans and sponsors,                   qualified expatriates, and the provisions              plan shall be treated as minimum
                                                      issuers and administrators of expatriate                relating to the market reforms (such as                essential coverage under section
                                                      health plans, individuals with and plan                 excepted benefits, and short-term,
                                                      sponsors of travel insurance and                        limited-duration coverage), R. Lisa                      1 The Patient Protection and Affordable Care Act,

                                                      supplemental health insurance                           Mojiri-Azad of the IRS Office of Chief                 Public Law 111–148, was enacted on March 23,
                                                                                                                                                                     2010, and the Health Care and Education
                                                      coverage, and individuals with short-                   Counsel, at 202–317–5500, Elizabeth                    Reconciliation Act, Public Law 111–152, was
                                                      term, limited-duration insurance. In                    Schumacher or Matthew Litton of the                    enacted on March 30, 2010. They are collectively
                                                      addition, this document proposes to                     Department of Labor, at 202–693–8335,                  known as the ‘‘Affordable Care Act.’’



                                                 VerDate Sep<11>2014   21:47 Jun 09, 2016   Jkt 238001   PO 00000   Frm 00002   Fmt 4701   Sfmt 4702   E:\FR\FM\10JNP3.SGM   10JNP3


                                                                                Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules                                                   38021

                                                      5000A(f) of the Internal Revenue Code                   medical loss ratio (MLR) reporting                      Departments 3) issued Affordable Care
                                                      of 1986, as amended (the Code) and any                  requirements for expatriate policies that               Act Implementation Frequently Asked
                                                      other section of the Code that                          are not expatriate health plans under the               Questions (FAQs) Part XIII, Q&A–1,
                                                      incorporates the definition of minimum                  EHCCA.                                                  providing relief from the ACA market
                                                      essential coverage; (2) the employer                                                                            reform requirements for certain
                                                                                                              General Statutory Background and
                                                      shared responsibility provisions of                                                                             expatriate group health insurance
                                                                                                              Enactment of ACA
                                                      section 4980H of the Code continue to                                                                           coverage.4 For plan years ending on or
                                                      apply; (3) the health care reporting                       The Health Insurance Portability and                 before December 31, 2015, the FAQ
                                                      provisions of sections 6055 and 6056 of                 Accountability Act of 1996 (HIPAA),                     provides that, with respect to expatriate
                                                      the Code continue to apply but with                     Public Law 104–191 (110 Stat. 1936),                    health plans, the Departments will
                                                      certain modifications relating to the use               added title XXVII of the PHS Act, part                  consider the requirements of subtitles A
                                                      of electronic media for required                        7 of ERISA, and Chapter 100 of the                      and C of title I of the ACA to be satisfied
                                                      statements to enrollees; (4) the excise                 Code, which impose portability and                      if the plan and issuer comply with the
                                                      tax provisions of section 4980I of the                  nondiscrimination rules with respect to                 pre-ACA version of title XXVII of the
                                                      Code continue to apply with respect to                  health coverage. These provisions of the                PHS Act. For purposes of the relief, an
                                                      coverage of certain qualified expatriates               PHS Act, ERISA, and the Code were                       expatriate health plan is an insured
                                                      who are assigned (rather than                           later augmented by other consumer                       group health plan with respect to which
                                                      transferred) to work in the United                      protection laws, including the Mental                   enrollment is limited to primary
                                                      States; and (5) the annual health                       Health Parity Act of 1996, the Paul                     insureds who reside outside of their
                                                      insurance providers fee imposed by                      Wellstone and Pete Domenici Mental                      home country for at least six months of
                                                      section 9010 of the ACA takes into                      Health Parity and Addiction Equity Act                  the plan year and any covered
                                                      account expatriate health insurance                     of 2008, the Newborns’ and Mothers’                     dependents, and its associated group
                                                      issuers for certain purposes for calendar               Health Protection Act, the Women’s                      health insurance coverage. The FAQ
                                                      years 2014 and 2015 only.                               Health and Cancer Rights Act, the                       also states that coverage provided under
                                                         This document also contains                          Genetic Information Nondiscrimination                   an expatriate group health plan is a form
                                                      proposed amendments to 26 CFR part                      Act of 2008, the Children’s Health                      of minimum essential coverage under
                                                      54, 29 CFR part 2590, and 45 CFR parts                  Insurance Program Reauthorization Act                   section 5000A of the Code. On January
                                                      146 and 148, which would specify                        of 2009, Michelle’s Law, and the ACA.                   9, 2014, the Departments issued
                                                      conditions for travel insurance,                           The ACA reorganizes, amends, and                     Affordable Care Act Implementation
                                                      supplemental health insurance                           adds to the provisions of part A of title               FAQs Part XVIII, Q&A–6 and Q&A–7,
                                                      coverage, and hospital indemnity and                    XXVII of the PHS Act relating to group                  which extended the relief of Affordable
                                                      other fixed indemnity insurance to be                   health plans and health insurance                       Care Act Implementation FAQs Part
                                                      considered excepted benefits. Excepted                  issuers in the group and individual                     XIII, Q&A–1 for insured expatriate
                                                      benefits are exempt from the                            markets. For this purpose, the term                     health plans to subtitle D of title I of the
                                                      requirements that generally apply under                 ‘‘group health plan’’ includes both                     ACA and also provided that the relief
                                                      title XXVII of the Public Health Service                insured and self-insured group health                   from the requirements of subtitles A, C,
                                                      Act (PHS Act), part 7 of the Employee                   plans.2 The ACA added section                           and D of title I of the ACA would apply
                                                      Retirement Income Security Act of 1974,                 715(a)(1) of ERISA and section                          for plan years ending on or before
                                                      as amended (ERISA), and Chapter 100 of                  9815(a)(1) of the Code to incorporate the               December 31, 2016.5
                                                      the Code. In addition, this document                    provisions of part A of title XXVII of the                 Subsequently, the EHCCA was
                                                      contains proposed amendments to (1)                     PHS Act (generally, sections 2701                       enacted on December 16, 2014. Section
                                                      the definition of ‘‘short-term, limited-                through 2728 of the PHS Act) into                       3(a) of the EHCCA provides that the
                                                      duration insurance,’’ for purposes of the               ERISA and the Code to make them                         ACA generally does not apply to
                                                      exclusion from the definition of                        applicable to group health plans and                    expatriate health plans, employers with
                                                      ‘‘individual health insurance coverage’’                health insurance issuers providing                      respect to expatriate health plans but
                                                      and (2) the definition of ‘‘essential                   health insurance coverage in connection                 solely in their capacity as plan sponsors
                                                      health benefits,’’ for purposes of the                  with group health plans.                                of these plans, and expatriate health
                                                      prohibition on annual and lifetime                                                                              insurance issuers with respect to
                                                                                                              Expatriate Health Plans, Expatriate
                                                      dollar limits in 26 CFR part 54, 29 CFR                                                                         coverage offered by such issuers under
                                                                                                              Health Plan Issuers and Qualified
                                                      2590, and 45 CFR parts 144 and 147.                                                                             expatriate health plans. Under section
                                                         This document clarifies an exemption                 Expatriates
                                                                                                                                                                      3(b) of the EHCCA, however, the ACA
                                                      set forth in 45 CFR 153.400(a)(1)(iii)                    Prior to the enactment of the EHCCA,                  continues to apply to expatriate health
                                                      related to the transitional reinsurance                 employers, issuers and covered                          plans with respect to the employer
                                                      program. Section 1341 of the Affordable                 individuals had expressed concerns                      shared responsibility provisions of
                                                      Care Act provides for the establishment                 about the application of the ACA market                 section 4980H of the Code, the reporting
                                                      of a transitional reinsurance program in                reform rules to expatriate health plans                 requirements of sections 6055 and 6056
                                                      each State to help pay the cost of                      and whether coverage under expatriate
                                                      treating high-cost enrollees in the                     health plans was minimum essential                         3 Note, however, that in sections under headings
                                                      individual market in the 2014 through                   coverage for purposes of section 5000A                  listing only two of the three Departments, the term
                                                      2016 benefit years. Section 1341(b)(3)(B)               of the Code. To address these concerns                  ‘‘Departments’’ generally refers only to the two
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                                                      of the ACA and 45 CFR 153.400(a)(1)                     on an interim basis, on March 8, 2013,                  Departments listed in the heading.
                                                                                                                                                                         4 Frequently Asked Questions about Affordable
                                                      require contributing entities to make                   the Departments of Labor, HHS, and the                  Care Act Implementation (Part XIII), available at
                                                      reinsurance contributions for major                     Treasury (collectively, the                             http://www.dol.gov/ebsa/pdf/faq-aca13.pdf and
                                                      medical coverage that is considered to                                                                          http://www.cms.gov/CCIIO/Resources/Fact-Sheets-
                                                      be part of a commercial book of                            2 The term ‘‘group health plan’’ is used in title    andFAQs/ACA_implementation_faq13.html.
                                                      business.                                               XXVII of the PHS Act, part 7 of ERISA, and Chapter         5 Frequently Asked Questions about Affordable

                                                                                                              100 of the Code, and is distinct from the term          Care Act Implementation (Part XVIII), available at
                                                         This document also contains                          ‘‘health plan,’’ as used in other provisions of title   https://www.dol.gov/ebsa/faqs/faq-aca18.html and
                                                      proposed conforming amendments to 45                    I of the ACA. The term ‘‘health plan’’ does not         https://www.cms.gov/CCIIO/Resources/Fact-Sheets-
                                                      CFR part 158 that address the separate                  include self-insured group health plans.                and-FAQs/aca_implementation_faqs18.html.



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                                                      38022                     Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules

                                                      of the Code, and the excise tax                         as defined by the Secretary of HHS, or                 market within the meaning of section
                                                      provisions of section 4980I of the Code.                for the 2015 and 2016 benefit years                    5000A(f)(1)(C) of the Code, for purposes
                                                      Section 3(b) of the EHCCA further                       only, is a self-insured group health plan              of sections 36B, 5000A and 6055 of the
                                                      provides that an expatriate health plan                 with respect to which enrollment is                    Code.
                                                      offered to primary enrollees described                  limited to participants who reside                        Under section 6055 of the Code, as
                                                      in sections 3(d)(3)(A) and (B) of the                   outside of their home country for at                   added by section 1502 of the ACA,
                                                      EHCCA shall be treated as an eligible                   least six months of the plan year and                  providers of minimum essential
                                                      employer sponsored plan under section                   any covered dependents of such                         coverage must file an information return
                                                      5000A(f)(2) of the Code, and that an                    participants. As noted in the March 8,                 with the Internal Revenue Service (IRS)
                                                      expatriate health plan offered to primary               2013 Affordable Care Act                               and furnish a written statement to
                                                      enrollees described in section 3(d)(3)(C)               Implementation FAQs Part XIII, Q&A–1,                  covered individuals reporting the
                                                      of the EHCCA shall be treated as a plan                 the FAQ definition of ‘‘expatriate health              months that an individual had
                                                      in the individual market under section                  plan’’ was extended to the definition of               minimum essential coverage. Under
                                                      5000A(f)(1)(C) of the Code. Section 3(c)                ‘‘expatriate health coverage’’ under 45                section 6056 of the Code, as added by
                                                      of the EHCCA sets forth rules for                       CFR 153.400(a)(1)(iii).                                section 1514 of the ACA, an applicable
                                                      expatriate health plans with respect to                    Section 3(a) of the EHCCA provides                  large employer (as defined in section
                                                      the annual health insurance providers                   that the ACA generally does not apply                  4980H(c)(2) of the Code and 26 CFR
                                                      fee imposed by section 9010 of the ACA.                 to expatriate health plans, employers                  54.4980H–1(a)(4) and 54.4980H–2) must
                                                         Sections 4375 and 4376 of the Code                   with respect to expatriate health plans                file an information return with the IRS
                                                      impose the Patient-Centered Outcomes                    but solely in their capacity as plan                   and furnish a written statement to its
                                                      Research Trust Fund (PCORTF) fee only                   sponsors of expatriate health plans, and               full-time employees reporting details
                                                      with respect to individuals residing in                 expatriate health insurance issuers with               regarding the minimum essential
                                                      the United States. Final regulations                    respect to coverage offered by such                    coverage, if any, offered by the
                                                      regarding the PCORTF fee exempt any                     issuers under expatriate health plans.                 employer. Under both sections 6055 and
                                                      specified health insurance policy or                    Accordingly, under the EHCCA, the                      6056 of the Code, reporting entities may
                                                      applicable self-insured group health                    transitional reinsurance program                       satisfy the requirement to furnish
                                                      plan designed and issued specifically to                contribution obligation under section                  statements to covered individuals and
                                                      cover employees who are working and                     1341 of the ACA does not apply to                      employees, respectively, by electronic
                                                      residing outside the United States from                 expatriate health plans.                               means only if the individual or
                                                      the fee. The exclusion from the ACA for                    Section 5000A of the Code, as added
                                                                                                                                                                     employee affirmatively consents to
                                                      expatriate health plans, employers with                 by section 1501 of the ACA, provides
                                                                                                                                                                     receiving the statements electronically.7
                                                      respect to expatriate health plans but                  that, for each month, taxpayers must
                                                                                                              have minimum essential coverage,                          Under section 4980H of the Code, as
                                                      solely in their capacity as plan sponsors                                                                      added by section 1513 of the ACA, an
                                                      of these plans, and expatriate health                   qualify for a health coverage exemption,
                                                                                                              or make an individual shared                           applicable large employer that does not
                                                      insurance issuers with respect to                                                                              offer minimum essential coverage to its
                                                      coverage offered by such issuers under                  responsibility payment when filing a
                                                                                                              federal income tax return. Section                     full-time employees (and their
                                                      expatriate health plans would apply to                                                                         dependents) or offers minimum
                                                      the PCORTF fee to the extent an                         5000A(f)(1)(B) of the Code provides that
                                                                                                              minimum essential coverage includes                    essential coverage that does not meet
                                                      expatriate health plan was not already                                                                         the standards for affordability and
                                                      excluded from the fee.                                  coverage under an eligible employer-
                                                                                                              sponsored plan. Section 5000A(f)(2) of                 minimum value will owe an assessable
                                                         Section 1341 of the ACA establishes                                                                         payment if a full-time employee is
                                                      a transitional reinsurance program to                   the Code and 26 CFR 1.5000A–2(c)
                                                                                                              provide that an eligible employer-                     certified as having enrolled in a
                                                      help stabilize premiums for non-                                                                               qualified health plan on an Exchange
                                                      grandfathered health insurance coverage                 sponsored plan means, with respect to
                                                                                                              an employee, group health insurance                    with respect to which a premium tax
                                                      in the individual health insurance                                                                             credit is allowed with respect to the
                                                      market from 2014 through 2016. Section                  coverage that is a governmental plan or
                                                                                                              any other plan or coverage offered in the              employee.
                                                      1341(b)(3)(B) of the ACA and the
                                                                                                              small or large group market within a                      Section 3(b)(2) of the EHCCA provides
                                                      implementing regulations at 45 CFR
                                                                                                              State, or a self-insured group health                  that the reporting requirements of
                                                      153.400(a)(1) require health insurance
                                                                                                              plan. Under section 5000A(f)(1)(C) of                  sections 6055 and 6056 of the Code and
                                                      issuers and certain self-insured group
                                                                                                              the Code, minimum essential coverage                   the provisions of section 4980H of the
                                                      health plans (‘‘contributing entities’’) to
                                                                                                              includes coverage under a health plan                  Code relating to the employer shared
                                                      make reinsurance contributions for
                                                                                                              offered in the individual market within                responsibility provisions for applicable
                                                      major medical coverage that is
                                                                                                              a State.                                               large employers continue to apply with
                                                      considered to be part of a commercial                      Section 3(b)(1)(A) of the EHCCA                     respect to expatriate health plans and
                                                      book of business. This language has                     provides that an expatriate health plan                qualified expatriates. Section 3(b)(2) of
                                                      been interpreted to exclude ‘‘expatriate                that is offered to primary enrollees who               the EHCCA provides a special rule for
                                                      health coverage.’’ 6 As such, HHS                       are qualified expatriates described in                 the use of electronic media for
                                                      regulation at 45 CFR 153.400(a)(1)(iii)                 sections 3(d)(3)(A) and 3(d)(3)(B) of the              statements required under sections 6055
                                                      provides that a contributing entity must                EHCCA is treated as an eligible                        and 6056 of the Code. Specifically, the
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                                                      make reinsurance contributions for lives                employer-sponsored plan within the                     required statements may be provided to
                                                      covered by its self-insured group health                meaning of section 5000A(f)(2) of the                  a primary insured for coverage under an
                                                      plans and health insurance coverage,                    Code. Section 3(b)(1)(B) of the EHCCA                  expatriate health plan using electronic
                                                      except to the extent that such plan or                  provides that, in the case of an                       media unless the primary insured has
                                                      coverage is expatriate health coverage,                 expatriate health plan that is offered to              explicitly refused to consent to receive
                                                        6 See HHS Notice of Benefit and Payment
                                                                                                              primary enrollees who are qualified                    the statement electronically.
                                                      Parameters for 2014 (78 FR 15410) (March 11, 2013)
                                                                                                              expatriates described in section
                                                      and HHS Notice of Benefit and Payment Parameters        3(d)(3)(C) of the EHCCA, the coverage is                 7 See 26 CFR 1.6055–2(a)(2)(i) and 301.6056–

                                                      for 2016 (80 FR 10750) (February 27, 2015).             treated as a plan in the individual                    2(a)(2)(i).



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                                                                                Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules                                           38023

                                                         Section 4980I of the Code, as added                  health plan must be qualified                          not been enacted. These provisions are
                                                      by section 9001 of the ACA, imposes an                  expatriates. For this purpose, primary                 sometimes referred to as the HIPAA
                                                      excise tax if the aggregate cost of                     enrollees do not include individuals                   portability and nondiscrimination
                                                      applicable employer-sponsored                           who are not nationals of the United                    requirements.
                                                      coverage provided to an employee                        States and reside in the country of their                 Section 3(d)(1) of the EHCCA
                                                      exceeds a statutory dollar limit. Section               citizenship. Section 3(d)(2)(B) of the                 provides that an expatriate health
                                                      3(b)(2) of the EHCCA provides that                      EHCCA provides that substantially all of               insurance issuer means a health
                                                      section 4980I of the Code continues to                  the benefits provided under a plan or                  insurance issuer that issues expatriate
                                                      apply to applicable employer-sponsored                  coverage must be benefits that are not                 health plans. Section 3(d)(2)(F)(i) of the
                                                      coverage (as defined in section                         excepted benefits. Section 3(d)(2)(C) of               EHCCA provides that an expatriate
                                                      4980I(d)(1) of the Code) of a qualified                 the EHCCA provides that the plan or                    health plan or coverage must be issued
                                                      expatriate (as described in section                     coverage must provide coverage for                     by an expatriate health plan issuer, or
                                                      3(d)(3)(A)(i) of the EHCCA) who is                      inpatient hospital services, outpatient                administered by an administrator, that
                                                      assigned (rather than transferred) to                   facility services, physician services, and             together with any person in the issuer’s
                                                      work in the United States.                              emergency services that are comparable                 or administrator’s controlled group: (1)
                                                         Section 9010 of the ACA imposes a                    to the emergency services coverage that                Maintains network provider agreements
                                                      fee on covered entities engaged in the                  was described in or offered under 5                    that provide for direct claims payments
                                                      business of providing health insurance                  U.S.C. 8903(1) for the 2009 plan year.8                (directly or through third-party
                                                      for United States health risks. Section                 Also, coverage for these services must                 contracts), with health care providers in
                                                      3(c)(1) of the EHCCA excludes                           be provided in certain countries. For                  eight or more countries; (2) maintains
                                                      expatriate health plans from the health                 qualified expatriates described in                     call centers (directly or through third-
                                                      insurance providers fee imposed by                      section 3(d)(3)(A) of the EHCCA                        party contracts) in three or more
                                                      section 9010 of the ACA by providing                    (category A) and qualified expatriates                 countries and accepts calls in eight or
                                                      that, for calendar years after 2015, a                  described in section 3(d)(3)(B) of the                 more languages; (3) processes at least
                                                      qualified expatriate (and any spouse,                   EHCCA (category B), coverage for these                 $1 million in claims in foreign currency
                                                      dependent, or any other individual                      services must be provided in the                       equivalents each year; (4) makes global
                                                      enrolled in the plan) enrolled in an                    country or countries where the                         evacuation/repatriation coverage
                                                      expatriate health plan is not considered                individual is working, and such other                  available; (5) maintains legal and
                                                      a United States health risk. Section                    country or countries as the Secretary of               compliance resources in three or more
                                                      3(c)(2) of the EHCCA provides a special                 HHS, in consultation with the Secretary                countries; and (6) has licenses to sell
                                                      rule solely for purposes of determining                 of the Treasury and the Secretary of                   insurance in more than two countries.
                                                      the health insurance providers fee                      Labor, may designate. For qualified                    In addition, section 3(d)(2)(F)(ii) of the
                                                      imposed by section 9010 of the ACA for                  expatriates who are members of a group                 EHCCA provides that the plan or
                                                      the 2014 and 2015 fee years.                            of similarly situated individuals                      coverage must offer reimbursement for
                                                         Section 162(m)(6) of the Code, as                                                                           items or services under such plan or
                                                                                                              described in section 3(d)(3)(C) of the
                                                      added by section 9014 of the ACA, in                                                                           coverage in the local currency in eight
                                                                                                              EHCCA (category C), the coverage must
                                                      general, limits to $500,000 the allowable                                                                      or more countries.
                                                                                                              be provided in the country or countries
                                                      deduction for remuneration attributable                                                                           Section 3(d)(3) of the EHCCA
                                                                                                              that the Secretary of HHS, in
                                                      to services performed by certain                                                                               describes three categories of qualified
                                                                                                              consultation with the Secretary of the
                                                      individuals for a covered health                                                                               expatriates. A category A qualified
                                                                                                              Treasury and the Secretary of Labor,
                                                      insurance provider. For taxable years                                                                          expatriate, under section 3(d)(3)(A) of
                                                                                                              may designate.                                         the EHCCA, is an individual whose
                                                      beginning after December 31, 2012,
                                                      section 162(m)(6)(C)(i) of the Code and                    Section 3(d)(2)(D) of the EHCCA                     skills, qualifications, job duties, or
                                                      26 CFR 1.162–31(b)(4)(A) provide that a                 provides that a plan qualifies as an                   expertise has caused the individual’s
                                                      health insurance issuer is a covered                    expatriate health plan under the EHCCA                 employer to transfer or assign the
                                                      health insurance provider if not less                   only if the plan sponsor reasonably                    individual to the United States for a
                                                      than 25 percent of the gross premiums                   believes that benefits under the plan                  specific and temporary purpose or
                                                      that it receives from providing health                  satisfy a standard at least actuarially                assignment tied to the individual’s
                                                      insurance coverage during the taxable                   equivalent to the level provided for in                employment and who the plan sponsor
                                                      year are from minimum essential                         section 36B(c)(2)(C)(ii) of the Code (that             has reasonably determined requires
                                                      coverage. Section 3(a)(3) of the EHCCA                  is, ‘‘minimum value’’). Section                        access to health insurance and other
                                                      provides that the provisions of the ACA                 3(d)(2)(E) of the EHCCA provides that                  related services and support in multiple
                                                      (including section 162(m)(6) of the                     dependent coverage of children, if                     countries, and is offered other
                                                      Code) do not apply to expatriate health                 offered under the expatriate health plan,              multinational benefits on a periodic
                                                      insurance issuers with respect to                       must continue to be available until the                basis (such as tax equalization,
                                                      coverage offered by such issuers under                  individual attains age 26 (unless the                  compensation for cross-border moving
                                                      expatriate health plans.                                individual is the child of a child                     expenses, or compensation to enable the
                                                         Section 3(d)(2) of the EHCCA                         receiving dependent coverage). Section                 expatriate to return to the expatriate’s
                                                      provides that an expatriate health plan                 3(d)(2)(G) of the EHCCA provides that                  home country). A category B qualified
                                                      means a group health plan, health                       an expatriate health plan must satisfy                 expatriate, under section 3(d)(3)(B) of
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                                                      insurance coverage offered in                           the provisions of title XXVII of the PHS               the EHCCA, is a primary insured who is
                                                      connection with a group health plan, or                 Act, Chapter 100 of the Code, and part                 working outside the United States for at
                                                      health insurance coverage offered to                    7 of subtitle B of title I of ERISA, that              least 180 days during a consecutive 12-
                                                      certain groups of similarly situated                    would otherwise apply if the ACA had                   month period that overlaps with the
                                                      individuals, provided that the plan or                                                                         plan year. A category C qualified
                                                                                                                8 These are emergency services comparable to
                                                      coverage meets a number of specific                                                                            expatriate, under section 3(d)(3)(C) of
                                                                                                              emergency services offered under a government-
                                                      requirements. Section 3(d)(2)(A) of the                 wide comprehensive health plan under the Federal
                                                                                                                                                                     the EHCCA, is an individual who is a
                                                      EHCCA provides that substantially all of                Employees Health Benefits (FEHB) program prior to      member of a group of similarly situated
                                                      the primary enrollees of an expatriate                  the enactment of the ACA.                              individuals that is formed for the


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                                                      38024                        Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules

                                                      purpose of traveling or relocating                         health plans described in section 3(d)(2)               medical care are secondary or incidental
                                                      internationally in service of one or more                  of the EHCCA. The MLR final rule                        to other insurance benefits.’’
                                                      of the purposes listed in section                          defines expatriate policies as                             The second category of excepted
                                                      501(c)(3) or (4) of the Code, or similarly                 predominantly group health insurance                    benefits is limited excepted benefits,
                                                      situated organizations or groups,                          policies that provide coverage to                       which may include limited scope vision
                                                      provided the group is not formed                           employees, substantially all of whom                    or dental benefits, and benefits for long-
                                                      primarily for the sale of health                           are: (1) Working outside their country of               term care, nursing home care, home
                                                      insurance coverage and the Secretary of                    citizenship; (2) working outside their                  health care, or community-based care.
                                                      HHS, in consultation with the Secretary                    country of citizenship and outside the                  Section 2791(c)(2)(C) of the PHS Act,
                                                      of the Treasury and the Secretary of                       employer’s country of domicile; or (3)                  section 733(c)(2)(C) of ERISA, and
                                                      Labor, determines the group requires                       non-U.S. citizens working in their home                 section 9832(c)(2)(C) of the Code
                                                      access to health insurance and other                       country.                                                authorize the Secretaries of HHS, Labor,
                                                      related services and support in multiple                      On January 29, 2016, the Treasury                    and the Treasury (collectively, the
                                                      countries.                                                 Department and the IRS issued Notice                    Secretaries) to issue regulations
                                                         Section 3(d)(4) of the EHCCA defines                    2016–14 (2016–7 IRB 315) to provide                     establishing other, similar limited
                                                      the United States as the 50 States, the                    guidance implementing the definition of                 benefits as excepted benefits. The
                                                      District of Columbia, and Puerto Rico.                     expatriate health plan for fee year 2016                Secretaries exercised this authority
                                                         Section 3(f) of the EHCCA provides                      with respect to the health insurance                    previously with respect to certain health
                                                      that, unless otherwise specified, the                      providers fee imposed by section 9010                   flexible spending arrangements.12 To be
                                                      requirements of the EHCCA apply to                         of the ACA. Like Notice 2015–29, Notice                 an excepted benefit under this second
                                                      expatriate health plans issued or                          2016–14 provides that the definition of                 category, the statute provides that these
                                                      renewed on or after July 1, 2015.                          expatriate health plan will be the same                 limited benefits must either: (1) Be
                                                                                                                 as provided in the MLR final rule                       provided under a separate policy,
                                                      IRS Notice 2015–43
                                                                                                                 definition, solely for the purpose of the               certificate, or contract of insurance; or
                                                        On July 20, 2015, the Treasury                           health insurance providers fee imposed                  (2) otherwise not be an integral part of
                                                      Department and the IRS issued Notice                       by section 9010 of the ACA for fee year                 a group health plan, whether insured or
                                                      2015–43 (2015–29 IRB 73) to provide                        2016.11                                                 self-insured.13
                                                      interim guidance on the implementation                        The Consolidated Appropriations Act,                    The third category of excepted
                                                      of the EHCCA and the application of                        2016, Public Law 114–113, Division P,                   benefits, referred to as ‘‘noncoordinated
                                                      certain provisions of the ACA to                           Title II, § 201, Moratorium on Annual                   excepted benefits,’’ includes both
                                                      expatriate health insurance issuers,                       Fee on Health Insurance Providers (the                  coverage for only a specified disease or
                                                      expatriate health plans, and employers                     Consolidated Appropriations Act),                       illness (such as cancer-only policies),
                                                      in their capacity as plan sponsors of                      suspends collection of the health                       and hospital indemnity or other fixed
                                                      expatriate health plans. The                               insurance providers fee for the 2017                    indemnity insurance. These benefits are
                                                      Departments of Labor and HHS                               calendar year. Thus, health insurance                   excepted under section 2722(c)(2) of the
                                                      reviewed and concurred with the                            issuers are not required to pay the fee                 PHS Act, section 732(c)(2) of ERISA,
                                                      interim guidance of Notice 2015–43.                        for 2017.                                               and section 9831(c)(2) of the Code only
                                                      Comments were received in response to                                                                              if all of the following conditions are
                                                                                                                 Excepted Benefits
                                                      Notice 2015–43, and these comments                                                                                 met: (1) The benefits are provided under
                                                      have been considered in drafting these                        Sections 2722 and 2763 of the PHS                    a separate policy, certificate, or contract
                                                      proposed regulations. The relevant                         Act, section 732 of ERISA, and section                  of insurance; (2) there is no
                                                      portions of Notice 2015–43 and the                         9831 of the Code provide that the                       coordination between the provision of
                                                      related comments are discussed in the                      respective requirements of title XXVII of               such benefits and any exclusion of
                                                      Overview of Proposed Regulations                           the PHS Act, part 7 of ERISA, and                       benefits under any group health plan
                                                      section of this preamble.9                                 Chapter 100 of the Code generally do                    maintained by the same plan sponsor;
                                                                                                                 not apply to the provision of certain                   and (3) the benefits are paid with
                                                      IRS Notices 2015–29 and 2016–14                            types of benefits, known as ‘‘excepted                  respect to any event without regard to
                                                         On March 30, 2015, the Treasury                         benefits.’’ These excepted benefits are                 whether benefits are provided under
                                                      Department and the IRS issued Notice                       described in section 2791(c) of the PHS                 any group health plan maintained by
                                                      2015–29 (2015–15 IRB 873) to provide                       Act, section 733(c) of ERISA, and                       the same plan sponsor. In the group
                                                      guidance implementing the special rule                     section 9832(c) of the Code.                            market, the regulations further provide
                                                      of section 3(c)(2) of the EHCCA for fee                       There are four statutorily enumerated                that to be hospital indemnity or other
                                                      years 2014 and 2015 with respect to the                    categories of excepted benefits. One                    fixed indemnity insurance, the
                                                      health insurance providers fee imposed                     category, under section 2791(c)(1) of the               insurance must pay a fixed dollar
                                                      by section 9010 of the ACA. Notice                         PHS Act, section 733(c)(1) of ERISA,                    amount per day (or per other time
                                                      2015–29 defines expatriate health plan                     and section 9832(c)(1) of the Code,                     period) of hospitalization or illness (for
                                                      by reference to the definition of                          identifies benefits that are excepted in                example, $100/day) regardless of the
                                                      expatriate policies in the MLR final rule                  all circumstances, including automobile                 amount of expenses incurred.14
                                                      issued by HHS 10 (MLR final rule                           insurance, liability insurance, workers                    Since the issuance of these
                                                      definition) solely for the purpose of                      compensation, and accidental death and                  regulations, the Departments have
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                                                      applying the special rule for fee years                    dismemberment coverage. Under                           released FAQs to address various
                                                      2014 and 2015. The Treasury                                section 2791(c)(1)(H) of the PHS Act                    requests for clarification as to what
                                                      Department and the IRS determined that                     (and the parallel provisions of ERISA                   types of coverage meet the conditions
                                                      the MLR final rule definition of                           and the Code), this category of excepted
                                                                                                                                                                           12 26 CFR 54.9831–1(c)(3)(v), 29 CFR
                                                      expatriate policies was sufficiently                       benefits also includes ‘‘[o]ther similar
                                                                                                                                                                         2590.732(c)(3)(v), 45 CFR 146.145(b)(3)(v).
                                                      broad to cover potential expatriate                        insurance coverage, specified in                          13 PHS Act section 2722(c)(1), ERISA section
                                                                                                                 regulations, under which benefits for                   732(c)(1), Code section 9831(c)(1).
                                                        9 See   26 CFR 601.601(d)(2)(ii)(B).                                                                               14 26 CFR 54.9831–1(c)(4)(i), 29 CFR
                                                        10 45   CFR 158.120(d)(4).                                 11 See   26 CFR 601.601(d)(2)(ii)(B).                 2590.732(c)(4)(i), 45 CFR 146.145(b)(4)(i).



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                                                                                 Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules                                               38025

                                                      necessary to be hospital indemnity or                   supplemental health insurance will be                  with respect to group or individual
                                                      other fixed indemnity insurance that are                considered an excepted benefit if it is                health insurance coverage that provides
                                                      excepted benefits. Affordable Care Act                  provided through a policy, certificate, or             coverage of additional categories of
                                                      Implementation FAQs Part XI, Q&A–7                      contract of insurance separate from the                benefits that are not EHBs in the
                                                      clarified that group health insurance                   primary coverage under the plan and                    applicable State. States were encouraged
                                                      coverage in which benefits are provided                 meets all of the following requirements:               to exercise similar enforcement
                                                      in varying amounts based on the type of                 (1) The supplemental policy, certificate,              discretion.
                                                      procedure or item, such as the type of                  or contract of insurance is issued by an
                                                                                                                                                                     Short-Term, Limited-Duration
                                                      surgery actually performed or                           entity that does not provide the primary
                                                                                                                                                                     Insurance Coverage
                                                      prescription drug provided is not a                     coverage under the plan; (2) the
                                                      hospital indemnity or other fixed                       supplemental policy, certificate, or                      Short-term limited duration insurance
                                                      indemnity insurance excepted benefit                    contract of insurance is specifically                  is a type of health insurance coverage
                                                      because it does not meet the condition                  designed to fill gaps in primary                       that is designed to fill in temporary gaps
                                                      that benefits be provided on a per day                  coverage, such as coinsurance or                       in coverage when an individual is
                                                      (or per other time period, such as per                  deductibles, but does not include a                    transitioning from one plan or coverage
                                                      week) basis, regardless of the amount of                policy, certificate, or contract of                    to another plan or coverage. Although
                                                      expenses incurred.15                                    insurance that becomes secondary or                    short-term, limited-duration insurance
                                                         The fourth category, under section                   supplemental only under a coordination                 is not an excepted benefit, it is similarly
                                                      2791(c)(4) of the PHS Act, section                      of benefits provision; (3) the cost of the             exempt from PHS Act requirements
                                                      733(c)(4) of ERISA, and section                         supplemental coverage is 15 percent or                 because it is not individual health
                                                      9832(c)(4) of the Code, is supplemental                 less of the cost of primary coverage                   insurance coverage. Section 2791(b)(5)
                                                      excepted benefits. Benefits are                         (determined in the same manner as the                  of the PHS Act provides that the term
                                                      supplemental excepted benefits only if                  applicable premium is calculated under                 ‘‘individual health insurance coverage’’
                                                      they are provided under a separate                      a COBRA continuation provision); and                   means health insurance coverage offered
                                                      policy, certificate, or contract of                     (4) the supplemental coverage sold in                  to individuals in the individual market,
                                                      insurance and are Medicare                              the group health insurance market does                 but does not include short-term,
                                                      supplemental health insurance (also                     not differentiate among individuals in                 limited-duration insurance. The PHS
                                                      known as Medigap), TRICARE                              eligibility, benefits, or premiums based               Act does not define short-term, limited-
                                                      supplemental programs, or ‘‘similar                     upon any health factor of the individual               duration insurance. Under existing
                                                      supplemental coverage provided to                       (or any dependents of the individual).                 regulations, short-term, limited-duration
                                                      coverage under a group health plan.’’                      On February 13, 2015, the                           insurance means ‘‘health insurance
                                                      The phrase ‘‘similar supplemental                       Departments issued Affordable Care Act                 coverage provided pursuant to a
                                                      coverage provided to coverage under a                   Implementation FAQs Part XXIII,                        contract with an issuer that has an
                                                      group health plan’’ is not defined in the               providing additional guidance on the                   expiration date specified in the contract
                                                      statute or regulations. However, the                    circumstances under which health                       (taking into account any extensions that
                                                      Departments’ regulations clarify that                   insurance coverage that supplements                    may be elected by the policyholder
                                                      one requirement to be similar                           group health plan coverage may be                      without the issuer’s consent) that is less
                                                      supplemental coverage is that the                       considered supplemental excepted                       than 12 months after the original
                                                      coverage ‘‘must be specifically designed                benefits.18 The FAQ states that the                    effective date of the contract.’’ 19
                                                      to fill gaps in primary coverage, such as               Departments intend to propose
                                                                                                              regulations clarifying the circumstances               Prohibition on Lifetime and Annual
                                                      coinsurance or deductibles.’’ 16
                                                         In 2007 and 2008, the Departments                    under which supplemental insurance                     Limits
                                                      issued guidance on the circumstances                    products that do not fill in cost-sharing                 Section 2711 of the PHS Act, as added
                                                      under which supplemental health                         under the primary plan are considered                  by the ACA, generally prohibits group
                                                      insurance would be considered                           to be specifically designed to fill gaps in            health plans and health insurance
                                                      excepted benefits under section                         primary coverage. Specifically, the FAQ                issuers offering group or individual
                                                      2791(c)(4) of the PHS Act (and the                      provides that health insurance coverage                health insurance coverage from
                                                      parallel provisions of ERISA, and the                   that supplements group health coverage                 imposing lifetime and annual dollar
                                                      Code).17 The guidance identifies several                by providing coverage of additional                    limits on EHB, as defined in section
                                                      factors the Departments will apply                      categories of benefits (as opposed to                  1302(b) of the ACA. These prohibitions
                                                      when evaluating whether supplemental                    filling in cost-sharing gaps under the                 apply to both grandfathered and non-
                                                      health insurance will be considered to                  primary plan) would be considered to                   grandfathered health plans, except the
                                                      be ‘‘similar supplemental coverage                      be designed to ‘‘fill in the gaps’’ of the             annual limits prohibition does not apply
                                                      provided to coverage under a group                      primary coverage only if the benefits                  to grandfathered individual health
                                                      health plan.’’ Specifically the                         covered by the supplemental insurance                  insurance coverage.
                                                      Departments’ guidance provides that                     product are not essential health benefits                 Under the ACA, self-insured group
                                                                                                              (EHB) in the State in which the product                health plans, large group market health
                                                        15 Frequently Asked Questions about Affordable        is being marketed. The FAQ further                     plans, and grandfathered health plans
                                                      Care Act Implementation (Part XI), available at         states that, until regulations are issued              are not required to offer EHB, but they
                                                      http://www.dol.gov/ebsa/faqs/faq-aca11.html and         and effective, the Departments will not
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                                                                                                                                                                     generally cannot place lifetime or
                                                      http://www.cms.gov/CCIIO/Resources/Fact-Sheets-         take enforcement action under certain
                                                      and-FAQs/aca_implementation_faqs11.html.                                                                       annual dollar limits on covered services
                                                        16 26 CFR 54.9831–1(c)(5)(i)(C), 29 CFR               conditions for failure to comply with                  that are considered EHB. The
                                                      2590.732(c)(5)(i)(C), and 45 CFR 146.145(b)(5)(i)(C).   the applicable insurance market reforms                Departments’ regulations provide that,
                                                        17 See EBSA Field Assistance Bulletin No. 2007–
                                                                                                                                                                     for plan years (in the individual market,
                                                      04 (available at http://www.dol.gov/ebsa/regs/             18 Frequently Asked Questions about Affordable
                                                                                                                                                                     policy years) beginning on or after
                                                      fab2007-4.html); CMS Insurance Standards Bulletin       Care Act Implementation (Part XXIII), available at
                                                      08–01 (available at http://www.cms.gov/CCIIO/           http://www.dol.gov/ebsa/pdf/faq-aca23.pdf and
                                                                                                                                                                     January 1, 2017, a plan or issuer that is
                                                      Resources/Files/Downloads/hipaa_08_01_508.pdf);         https://www.cms.gov/CCIIO/Resources/Fact-Sheets-
                                                      and IRS Notice 2008–23 (available at http://            and-FAQs/Downloads/Supplmental-FAQ_2-13-15-              19 26 CFR 54.9801–2, 29 CFR 2590.701–2, 45 CFR

                                                      www.irs.gov/irb/2008-07_IRB/ar09.html).                 final.pdf.                                             144.103.



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                                                      38026                     Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules

                                                      not required to provide EHB may select                  Definition of Expatriate Health                         insurance issuer) that are members of
                                                      from among any of the 51 base-                          Insurance Issuer                                        the health insurance issuer’s controlled
                                                      benchmark plans selected by a State or                     Consistent with sections 3(d)(1) and                 group or through contracts between the
                                                      applied by default pursuant to 45 CFR                   (d)(2)(F) of the EHCCA, the proposed                    expatriate health insurance issuer and
                                                      156.100, or one of the three FEHBP                      regulations define ‘‘expatriate health                  third parties.
                                                      options specified at 45 CFR                             insurance issuer’’ as a health insurance                Definition of Expatriate Health Plan
                                                      156.100(a)(3), for purposes of complying                issuer (as defined under 26 CFR
                                                                                                                                                                         Consistent with section 3(d)(2) of the
                                                      with the lifetime and annual limits                     54.9801–2, 29 CFR 2590.701–2 and 45
                                                                                                                                                                      EHCCA, the proposed regulations define
                                                      prohibition in section 2711 of the PHS                  CFR 144.103) that issues expatriate
                                                                                                                                                                      ‘‘expatriate health plan’’ as a plan
                                                      Act.20                                                  health plans and satisfies certain
                                                                                                                                                                      offered to qualified expatriates and that
                                                                                                              requirements.21 The requirements for
                                                      II. Overview of the Proposed                                                                                    satisfies certain requirements. With
                                                                                                              the issuer to be an expatriate health
                                                      Regulations                                                                                                     respect to qualified expatriates in
                                                                                                              insurance issuer include that, in the
                                                                                                                                                                      categories A or B, the plan must be a
                                                      A. Expatriate Health Plans                              course of its normal business
                                                                                                                                                                      group health plan (whether or not
                                                                                                              operations, the issuer: (1) Maintains
                                                                                                                                                                      insured). In contrast, with respect to
                                                      In General                                              network provider agreements that
                                                                                                                                                                      qualified expatriates in category C, the
                                                                                                              provide for direct claims payments with
                                                         Section 3(a) of the EHCCA provides                                                                           plan must be health insurance coverage
                                                                                                              health care providers in eight or more
                                                      that the ACA generally does not apply                                                                           that is not a group health plan. In
                                                                                                              countries; (2) maintains call centers in
                                                      to expatriate health plans, employers                                                                           addition, consistent with section
                                                                                                              three or more countries, and accepts
                                                      with respect to expatriate health plans                                                                         3(d)(2)(A) of the EHCCA, the proposed
                                                                                                              calls from customers in eight or more
                                                      but solely in their capacity as plan                                                                            regulations require that substantially all
                                                                                                              languages; (3) processed at least $1
                                                                                                                                                                      primary enrollees in the expatriate
                                                      sponsors of expatriate health plans, and                million in claims in foreign currency
                                                                                                                                                                      health plan must be qualified
                                                      expatriate health insurance issuers with                equivalents during the preceding
                                                                                                                                                                      expatriates. The proposed regulations
                                                      respect to coverage offered by such                     calendar year; (4) makes global
                                                                                                                                                                      define a primary enrollee as the
                                                      issuers under expatriate health plans.                  evacuation/repatriation coverage
                                                                                                                                                                      individual covered by the plan or policy
                                                      Consistent with this provision, the                     available; (5) maintains legal and
                                                                                                                                                                      whose eligibility for coverage is not due
                                                      proposed regulations provide that the                   compliance resources in three or more
                                                                                                                                                                      to that individual’s status as the spouse,
                                                      market reform provisions enacted or                     countries; and (6) has licenses or other
                                                                                                                                                                      dependent, or other beneficiary of
                                                      amended as part of the ACA, included                    authority to sell insurance in more than
                                                                                                                                                                      another covered individual. However,
                                                      in sections 2701 through 2728 of the                    two countries, including the United
                                                                                                                                                                      notwithstanding this definition, an
                                                      PHS Act and incorporated into section                   States. For purposes of meeting the $1
                                                                                                                                                                      individual is not a primary enrollee if
                                                      9815 of the Code and section 715 of                     million threshold for claims processed                  the individual is not a national of the
                                                      ERISA, do not apply to an expatriate                    in foreign currency equivalents, the                    United States and the individual resides
                                                      health plan, an employer, solely in its                 proposed regulations provide that the                   in his or her country of citizenship.
                                                      capacity as plan sponsor of an expatriate               dollar value of claims processed is                     Further, the proposed regulations
                                                      health plan, and an expatriate health                   determined using the Treasury                           provide that, for this purpose, a
                                                                                                              Department’s currency exchange rate in                  ‘‘national of the United States’’ has the
                                                      insurance issuer with respect to
                                                                                                              effect on the last day of the preceding                 meaning used in the Immigration and
                                                      coverage under an expatriate health
                                                                                                              calendar year.22 Comments are                           Nationality Act (8 U.S.C. 1101 et. seq.)
                                                      plan. Similarly, section 162(m)(6) of the
                                                                                                              requested regarding whether use of the                  and 8 CFR parts 301 to 392, including
                                                      Code does not apply to an expatriate                    calendar year as the basis for measuring
                                                      health insurance issuer with respect to                                                                         U.S. citizens. Thus, for example, an
                                                                                                              the dollar amount of claims processed                   individual born in American Samoa is
                                                      premiums received for coverage under                    presents administrative challenges, and
                                                      an expatriate health plan. In addition,                                                                         a national of the United States at birth
                                                                                                              how the resulting challenges, if any,                   for purposes of the EHCCA and the
                                                      under the EHCCA, the PCORTF fee                         may be addressed. The proposed
                                                      under sections 4375 and 4376 of the                                                                             proposed regulations.
                                                                                                              regulations provide that each of the                       Comments in response to Notice
                                                      Code and the transitional reinsurance                   applicable requirements may be                          2015–43 requested clarification of the
                                                      program fee under section 1341 of the                   satisfied by two or more entities                       ‘‘substantially all’’ enrollment
                                                      ACA do not apply to expatriate health                   (including one entity that is the health                requirement, with one comment
                                                      plans. The EHCCA excludes expatriate                                                                            suggesting that 93 percent of the
                                                      health plans from the health insurance                     21 Section 3(d)(1) of the EHCCA provides that the
                                                                                                                                                                      enrollees would be an appropriate
                                                      providers fee imposed by section 9010                   term ‘‘expatriate health insurance issuer’’ means a
                                                                                                                                                                      threshold. In response to the request for
                                                                                                              health insurance issuer that issues expatriate health
                                                      except that the EHCCA provides a                        plans; section 3(d)(5)(A) of the EHCCA provides         clarification, the proposed regulations
                                                      special rule solely for purposes of                     that the term ‘‘health insurance issuer’’ has the       provide that a plan satisfies the
                                                      determining the fee for the 2014 and                    meaning given in section 2791 of the PHS Act. The       ‘‘substantially all’’ enrollment
                                                      2015 fee years. The EHCCA also                          definition of health insurance issuer in section
                                                                                                              9832(b)(2) of the Code and section 733(b)(2) of
                                                                                                                                                                      requirement if, on the first day of the
                                                      designates certain coverage by an                       ERISA and underlying regulations are substantively      plan year, less than 5 percent of the
                                                      expatriate health plan as minimum                       identical to the definition under section 2791 of the   primary enrollees (or less than 5
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                                                      essential coverage under section                        PHS Act and its underlying regulations.                 primary enrollees if greater) are not
                                                      5000A(f) of the Code, and provides                         As discussed in the section of this preamble         qualified expatriates (effectively a 95
                                                                                                              entitled ‘‘Definition of Expatriate Health Plan’’ a
                                                      special rules for the application of the                health insurance issuer as defined in section 2791      percent threshold). Consistent with
                                                      reporting rules under sections 6055 and                 of the PHS Act is limited to an entity licensed to      section 3(d)(2)(B) of the EHCCA, the
                                                      6056 of the Code to expatriate health                   engage in the business of insurance in a State and      proposed regulations further provide
                                                                                                              subject to State law that regulates insurance.          that substantially all of the benefits
                                                      plans.                                                     22 The most recent Treasury Department currency

                                                                                                              exchange rate can be found at https://
                                                                                                                                                                      provided under an expatriate health
                                                        20 26 CFR 54.9815–2711(c), 29 CFR 2590.715–           www.fiscal.treasury.gov/fsreports/rpt/                  plan must be benefits that are not
                                                      2711(c), 45 CFR 147.126(c).                             treasRptRateExch/currentRates.htm.                      excepted benefits as described in 26


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                                                                                 Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules                                         38027

                                                      CFR 54.9831–1(c), 29 CFR 2590.732(c),                    available until the individual attains age            provide certificates of creditable
                                                      45 CFR 146.145(b) and 148.220, as                        26, unless the individual is the child of             coverage on expatriate health plans
                                                      applicable. The Departments intend that                  a child receiving dependent coverage.                 would only be useful in situations in
                                                      the first day of the plan year approach,                 Additionally, consistent with section                 which an individual transferred from
                                                      which has been used in other contexts,                   3(d)(2)(F)(ii) of the EHCCA, the plan or              one expatriate health plan to another
                                                      will be simple to administer.23                          coverage must offer reimbursements for                and that reimposing the requirement on
                                                      Moreover, the 95% threshold has been                     items or services in the local currency               all health plans would require
                                                      used in certain other circumstances in                   in eight or more countries.                           certificates that would be unnecessary
                                                      applying a ‘‘substantially all’’                            Consistent with section 3(d)(2)(F) of              except in limited cases, such as for an
                                                      standard.24 The Departments solicit                      the EHCCA, the proposed regulations                   individual who ceased coverage with a
                                                      comment on this regulatory approach                      also provide that the policy or coverage              health plan or policy and began
                                                      and whether the current regulatory                       under an expatriate health plan must be               coverage under an expatriate health
                                                      language is sufficient to protect against                issued by an expatriate health insurance              plan that imposed a preexisting
                                                      potential abuses, or whether any further                 issuer or administered by an expatriate               condition exclusion. Because
                                                      anti-abuse provision is necessary.                       health plan administrator. With respect               reimposing the requirement to provide
                                                        Consistent with section 3(d)(2)(C) of                  to qualified expatriates in categories A              certificates of creditable coverage would
                                                      the EHCCA, the proposed regulations                      or B (generally, individuals whose travel             be inefficient and overly broad, and
                                                      also require that an expatriate health                   or relocation is related to their                     relevant in only limited circumstances,
                                                      plan cover certain types of services.                    employment with an employer), the                     the proposed regulations do not require
                                                      Specifically, an expatriate health plan                  coverage must be under a group health                 expatriate health plans to provide
                                                      must provide coverage for inpatient                      plan (whether insured or self-insured).               certificates of creditable coverage.
                                                      hospital services, outpatient facility                   With respect to qualified expatriates in              However, expatriate health plans
                                                      services, physician services, and                        category C (generally, groups of                      imposing a preexisting condition
                                                      emergency services (comparable to                        similarly situated individuals travelling             exclusion must still comply with certain
                                                      emergency services coverage that was                     for certain tax-exempt purposes), the                 limitations on preexisting condition
                                                      described in and offered under section                   coverage must be under a policy issued                exclusions that would otherwise apply
                                                      8903(1) of title 5, United States Code for               by an expatriate health insurance issuer.             if the ACA had not been enacted.
                                                      plan year 2009). Coverage for such                          Finally, consistent with section                   Therefore, the proposed regulations
                                                      services must be available in certain                    3(d)(2)(G) of the EHCCA, the proposed                 require expatriate health plans to ensure
                                                      countries depending on the type of                       regulations provide that an expatriate                that individuals who enroll in the
                                                      qualified expatriates covered by the                     health plan must satisfy the provisions               expatriate health plan are provided an
                                                      plan. The statute authorizes the                         of Chapter 100 of the Code, part 7 of                 opportunity to demonstrate creditable
                                                      Secretary of HHS, in consultation with                   subtitle B of title I of ERISA and title
                                                                                                                                                                     coverage to offset any preexisting
                                                      the Secretary of the Treasury and                        XXVII of the PHS Act that would
                                                                                                                                                                     condition exclusion. For example, an
                                                      Secretary of Labor, to designate other                   otherwise apply if the ACA had not
                                                                                                                                                                     email from the prior issuer (or former
                                                      countries where coverage for such                        been enacted. Among other
                                                                                                                                                                     plan administrator or plan sponsor)
                                                      services must be made available to the                   requirements, those provisions limited
                                                                                                                                                                     providing information about past
                                                      qualified expatriate.                                    the ability of a group health plan or
                                                                                                                                                                     coverage could be sufficient
                                                        Consistent with section 3(d)(2)(D) of                  group health insurance issuer to impose
                                                                                                                                                                     confirmation of prior creditable
                                                      the EHCCA, the proposed regulations                      preexisting condition exclusions (which
                                                                                                                                                                     coverage.
                                                      provide that in the case of an expatriate                are now prohibited for grandfathered
                                                      health plan, the plan sponsor must                       and non-grandfathered group health                       Comments in response to Notice
                                                      reasonably believe that benefits                         plans and health insurance coverage                   2015–43 requested clarification of the
                                                      provided by the plan satisfy the                         offered in connection with such plans,                treatment of health coverage provided
                                                      minimum value requirements of section                    and non-grandfathered individual                      by a foreign government. Specifically,
                                                      36B(c)(2)(C)(ii) of the Code.25 For this                 health insurance coverage under the                   comments requested that health
                                                      purpose, the proposed regulations                        ACA), including a requirement that the                coverage provided by a foreign
                                                      provide that the plan sponsor is                         period of any preexisting condition                   government be treated as minimum
                                                      permitted to rely on the reasonable                      exclusion be reduced by the length of                 essential coverage under section 5000A
                                                      representations of the issuer or                         any period of creditable coverage the                 of the Code, and that, for purposes of
                                                      administrator regarding whether                          individual had without a 63-day break                 the employer shared responsibility
                                                      benefits offered by the group health plan                in coverage.                                          provision of section 4980H of the Code,
                                                      or issuer satisfy the minimum value                         Prior to the enactment of the ACA,                 an offer of such coverage be treated as
                                                      requirements unless the plan sponsor                     HIPAA and underlying regulations also                 an offer of minimum essential coverage
                                                      knows or has reason to know that the                     generally required that plans and issuers             for certain foreign employees working in
                                                      benefits fail to satisfy the minimum                     provide certificates of creditable                    the United States. These issues are
                                                      value requirements. Consistent with                      coverage when an individual ceased to                 generally beyond the scope of these
                                                      section 3(d)(2)(D) of the EHCCA, in the                  be covered by a plan or policy and upon               proposed regulations. Under the
                                                      case of an expatriate health plan that                   request. Following the enactment of the               existing regulations under section
                                                      provides dependent coverage of                           ACA, the regulations under these                      5000A(f)(1)(E) of the Code, there are
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                                                      children, the proposed regulations                       provisions have eliminated the                        procedures for health benefits coverage
                                                      provide that such coverage must be                       requirement for providing certificates of             not otherwise designated under section
                                                                                                               creditable coverage beginning December                5000A(f)(1) of the Code as minimum
                                                        23 26 CFR 54.9831–1(b), 29 CFR 2590.732(b), 45         31, 2014, because the requirement is                  essential coverage to be recognized by
                                                      CFR 146.145(b).                                          generally no longer relevant to plans                 the Secretary of HHS, in coordination
                                                        24 See e.g., 26 CFR 1.460–6(d)(4)(i)(D)(1).
                                                        25 For this purpose, generally ‘‘minimum value’’
                                                                                                               and participants as a result of the                   with the Secretary of the Treasury, as
                                                      takes into account the provision of ‘‘essential health
                                                                                                               prohibition on preexisting condition                  minimum essential coverage. The
                                                      benefits’’ as defined in section 1302(b)(1) of the       exclusions. The Departments recognize                 Secretary of HHS has provided that
                                                      Affordable Care Act.                                     that reimposing the requirement to                    coverage under a group health plan


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                                                      38028                     Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules

                                                      provided through insurance regulated                    is not minimum essential coverage                      consecutive 12-month period that is
                                                      by a foreign government is minimum                      pursuant to the EHCCA.                                 within a single plan year, or across two
                                                      essential coverage for expatriates who                                                                         consecutive plan years. Section
                                                                                                              Definition of Expatriate Health Plan
                                                      meet specified conditions.26                                                                                   3(d)(2)(C)(ii) of the EHCCA requires an
                                                                                                              Administrator
                                                      Furthermore, plan sponsors of health                                                                           expatriate health plan provided to
                                                      coverage that is not recognized as                         The proposed regulations define                     category B expatriates to cover certain
                                                      minimum essential coverage through                      ‘‘expatriate health plan administrator,’’              specified services, such as inpatient and
                                                      statute, regulation, or guidance may                    with respect to self-insured coverage, as              outpatient services, in the country in
                                                      submit an application to CMS for                        an administrator of self-insured                       which the individual is ‘‘present in
                                                      minimum essential coverage recognition                  coverage that generally satisfies the                  connection’’ with his employment. The
                                                      pursuant to 45 CFR 156.604.27 For a                     same requirements as an ‘‘expatriate                   Departments request comments on
                                                      complete list of coverage recognized by                 health insurance issuer.’’                             whether it would be helpful to provide
                                                      CMS as minimum essential coverage                       Definition of Qualified Expatriate                     further administrative clarification of
                                                      under section 5000A(f)(1)(E) of the                                                                            this statutory language regarding the
                                                                                                                 Consistent with section 3(d)(3) of the
                                                      Code, see https://www.cms.gov/CCIIO/                                                                           country or countries in which the
                                                                                                              EHCCA, the proposed regulations define
                                                      Programs-and-Initiatives/Health-                                                                               services must be provided, and, if so,
                                                                                                              ‘‘qualified expatriate’’ as one of three
                                                      Insurance-Market-Reforms/minimum-                                                                              whether there are facts or circumstances
                                                                                                              types of individuals. The first type of
                                                      essential-coverage.html.                                                                                       that will present particular challenges in
                                                                                                              qualified expatriate, a category A
                                                         Comments also requested that policies                                                                       applying this rule.
                                                                                                              expatriate, is an individual who has the
                                                      sold by non-United States health                                                                                  Finally, consistent with section
                                                                                                              skills, qualifications, job duties, or
                                                      insurance issuers be treated as                                                                                3(d)(3)(C) of the EHCCA, the proposed
                                                                                                              expertise that has caused the
                                                      minimum essential coverage under                        individual’s employer to transfer or                   regulations provide that a third type of
                                                      section 5000A of the Code, or as                        assign the individual to the United                    qualified expatriate, a category C
                                                      expatriate health plans. Section                        States for a specific and temporary                    expatriate, is an individual who is a
                                                      3(d)(5)(A) of the EHCCA specifies that                  purpose or assignment that is tied to the              member of a group of similarly situated
                                                      the terms ‘‘health insurance issuer’’ and               individual’s employment with the                       individuals that is formed for the
                                                      ‘‘health insurance coverage’’ have the                  employer. A category A expatriate may                  purpose of traveling or relocating
                                                      meanings given those terms by section                   only be an individual who: (1) The plan                internationally in service of one or more
                                                      2791 of the PHS Act. Section 2791 of the                sponsor has reasonably determined                      of the purposes listed in section
                                                      PHS Act (and parallel provisions in                     requires access to health coverage and                 501(c)(3) or (4) of the Code, or similarly
                                                      section 9832(b) of the Code and section                 other related services and support in                  situated organizations or groups, and
                                                      733(b) of ERISA) define those terms by                  multiple countries, (2) is offered other               meets certain other conditions.28 A
                                                      reference to an entity licensed to engage               multinational benefits on a periodic                   category C expatriate does not include
                                                      in the business of insurance in a State                 basis (such as tax equalization,                       an individual in a group that is formed
                                                      and subject to State law that regulates                 compensation for cross-border moving                   primarily for the sale or purchase of
                                                      insurance. Under section 2791 of the                    expenses, or compensation to enable the                health insurance coverage. To qualify as
                                                      PHS Act, the term ‘‘State’’ means each                  individual to return to the individual’s               this type of qualified expatriate, the
                                                      of the several States, the District of                  home country), and (3) is not a national               Secretary of HHS, in consultation with
                                                      Columbia, Puerto Rico, the Virgin                       of the United States. The proposed                     the Secretary of the Treasury and the
                                                      Islands, Guam, American Samoa, and                      regulations provide that an individual                 Secretary of Labor, must determine that
                                                      the Northern Mariana Islands.                           who is not expected to travel outside the              the group requires access to health
                                                      Consistent with those provisions, these                 United States at least one time per year               coverage and other related services and
                                                      proposed regulations limit an expatriate                during the coverage period would not                   support in multiple countries. The
                                                      health insurance issuer to a health                     reasonably ‘‘require access’’ to health                proposed regulations clarify that a
                                                      insurance issuer within the meaning of                  coverage and other related services and                category C expatriate does not include
                                                      those sections (and that meets the other                support in multiple countries.                         an individual whose international travel
                                                      requirements set forth in the proposed                  Furthermore, under the proposed                        or relocation is related to employment.
                                                      regulations). As such, a non-United                     regulations, the offer of a one-time de                Thus, an individual whose travel is
                                                      States health insurance issuer does not                 minimis benefit would not meet the                     employment-related may be a qualified
                                                      qualify as an expatriate health insurance               standard for the ‘‘periodic’’ offer of                 expatriate only in category A or B. The
                                                      issuer within the meaning of the                        ‘‘other multinational benefits.’’                      proposed regulations also provide that,
                                                      EHCCA, and coverage issued by a non-                       Section 3(d)(3)(B) of the EHCCA                     in the case of a group organized to travel
                                                      United States issuer that is not                        provides that a second type of qualified               or relocate outside the United States, the
                                                      otherwise minimum essential coverage                    expatriate, a category B expatriate, is an             individual must be expected to travel or
                                                                                                              individual who works outside the                       reside outside the United States for at
                                                        26 See CMS Insurance Standards Bulletin Series.
                                                                                                              United States for a period of at least 180             least 180 days in a consecutive 12-
                                                      CCIIO Sub-Regulatory Guidance: Process for              days in a consecutive 12-month period                  month period that overlaps with the
                                                      Obtaining Recognition as Minimum Essential                                                                     policy year (or in the case of a policy
                                                      Coverage (Oct. 31, 2013), available at https://         that overlaps with the plan year. A
                                                                                                              comment requested that the regulations                 year that is less than 12 months, at least
asabaliauskas on DSK3SPTVN1PROD with PROPOSALS




                                                      www.cms.gov/CCIIO/Resources/Regulations-and-
                                                      Guidance/Downloads/mec-guidance-10-31-                  clarify that the 12-month period could
                                                      2013.pdf.                                               either be within a single plan year, or                  28 Code section 501(c)(3) describes an
                                                        27 See CMS Insurance Standards Bulletin Series.                                                              organization formed for religious, charitable,
                                                      CCIIO Sub-Regulatory Guidance: Process for
                                                                                                              across two consecutive plan years.                     scientific, public safety, literary, or educational
                                                      Obtaining Recognition as Minimum Essential              Consistent with the statutory language,                purposes, or to foster national or international
                                                      Coverage (Oct. 31, 2013), available at https://         the proposed regulations provide that a                amateur sports competition, or for the prevention of
                                                      www.cms.gov/CCIIO/Resources/Regulations-and-            category B expatriate is an individual                 cruelty to children or animals, and not for political
                                                      Guidance/Downloads/mec-guidance-10-31-                                                                         candidate campaign or legislative purposes or
                                                      2013.pdf. See also CMS Insurance Standards
                                                                                                              who is a national of the United States                 propaganda. Code section 501(c)(4) describes an
                                                      Bulletin Series. CCIIIO Sub-Regulatory Guidance:        and who works outside the United                       organization operated exclusively for the promotion
                                                      Minimum Essential Coverage.                             States for at least 180 days in a                      of social welfare.



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                                                                                Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules                                           38029

                                                      half of the policy year), and in the case               the United States at least one time per                the Federal Register, taxpayers may rely
                                                      of a group organized to travel or relocate              year in order to be considered to                      on these proposed regulations with
                                                      within the United States, the individual                reasonably require access to health                    respect to any fee that is due beginning
                                                      must be expected to travel or reside in                 coverage and other related services and                with the 2018 fee year.
                                                      the United States for not more than 12                  support in multiple countries.
                                                                                                                                                                     Federal Tax Provision: Section
                                                      months. The proposed regulations                        Comments are also requested on the
                                                      provide that a group of category C                      proposed standard with respect to                      162(m)(6) of the Code
                                                      expatriates must also meet the test for                 category C expatriates being expected to                  Section 162(m)(6) of the Code, as
                                                      having associational ties under section                 travel or reside outside the United                    added by section 9014 of the ACA, in
                                                      2791(d)(3)(B) through (F) of the PHS Act                States for at least 180 days in a                      general, limits to $500,000 the allowable
                                                      (42 U.S.C. 300gg–91(d)(3)(B) through                    consecutive 12-month period that                       deduction for remuneration attributable
                                                      (F)).                                                   overlaps with the policy year, and                     to services performed by certain
                                                         For purposes of section 3(d)(3)(C)(iii)              whether there are fact patterns in which               individuals for a covered health
                                                      of the EHCCA, the proposed regulations                  the 12-month period could either be                    insurance provider. For taxable years
                                                      provide that the Secretary of HHS, in                   within a single policy year, or across                 beginning after December 31, 2012,
                                                      consultation with the Secretary of the                  two consecutive policy years.                          section 162(m)(6)(C)(i) of the Code and
                                                      Treasury and the Secretary of Labor, has                                                                       26 CFR 1.162–31(b)(4)(A) provide that a
                                                      determined that, in the case of a group                 Definitions of Group Health Plan and
                                                                                                              United States                                          health insurance issuer is a covered
                                                      of similarly situated individuals that                                                                         health insurance provider if not less
                                                      meets all of the criteria in the proposed                  Consistent with section 3(d)(5)(A) of
                                                                                                                                                                     than 25 percent of the gross premiums
                                                      regulations, the group requires access to               the EHCCA, for purposes of applying
                                                                                                                                                                     that it receives from providing health
                                                      health coverage and other related                       the definition of expatriate health plan,
                                                                                                                                                                     insurance coverage during the taxable
                                                      services and support in multiple                        ‘‘group health plan’’ means a group
                                                                                                                                                                     year are from minimum essential
                                                      countries.                                              health plan as defined under 26 CFR
                                                                                                                                                                     coverage. Section 3(a)(3) of the EHCCA
                                                         Comments in response to Notice                       54.9831–1(a)(1), 29 CFR 2590.732(a)(1)
                                                                                                                                                                     provides that the provisions of the ACA
                                                      2015–43 requested that category C                       or 45 CFR 146.145(a)(1), as applicable.
                                                                                                                                                                     (which include section 162(m)(6) of the
                                                      expatriates not be limited to individuals               Consistent with section 3(d)(4) of the
                                                                                                                                                                     Code) do not apply to expatriate health
                                                      expected to travel or reside in the                     EHCCA, the proposed regulations define
                                                                                                                                                                     insurance issuers with respect to
                                                      United States for 12 or fewer months.                   ‘‘United States’’ to mean the 50 States,
                                                                                                              the District of Columbia and Puerto                    coverage offered by such issuers under
                                                      While the EHCCA does not include a
                                                                                                              Rico.                                                  expatriate health plans. Consistent with
                                                      time limit for category C expatriates,
                                                                                                                                                                     this rule, the proposed regulations
                                                      section 3(e) of the EHCCA provides that
                                                                                                              Section 9010 of the ACA                                exclude from the definition of the term
                                                      the Departments ‘‘may promulgate
                                                      regulations necessary to carry out this                    Section 3(c)(1) of the EHCCA provides               ‘‘premium’’ for purposes of section
                                                      Act, including such rules as may be                     that, for purposes of the health                       162(m)(6) of the Code amounts received
                                                      necessary to prevent inappropriate                      insurance providers fee imposed by                     in payment for coverage under an
                                                      expansion of the exclusions under the                   section 9010 of the ACA, a qualified                   expatriate health plan. As a result, those
                                                      Act from applicable laws and                            expatriate enrolled in an expatriate                   amounts received are included in
                                                      regulations.’’ In the group market, the                 health plan is not a United States health              neither the numerator nor the
                                                      EHCCA and the proposed regulations                      risk for calendar years after 2015.                    denominator for purposes of
                                                      define a category A expatriate with                     Section 3(c)(2) of the EHCCA provides                  determining whether the 25 percent
                                                      respect to a ‘‘specific and temporary                   a special rule applicable to calendar                  standard under section 162(m)(6)(C)(i)
                                                      purpose or assignment’’ tied to the                     years 2014 and 2015. The Treasury                      of the Code and 26 CFR 1.162–
                                                      individual’s employment in the United                   Department and the IRS issued Notices                  31(b)(4)(A) is met, and they have no
                                                      States. It is the view of HHS, in                       2015–29 and 2016–14 to address the                     impact on whether a particular issuer is
                                                      consultation with the Departments of                    definition of expatriate health plan for               a covered health insurance provider.
                                                      Labor and the Treasury, that similar                    purposes of the health insurance                       Federal Tax Provision: Section 4980I of
                                                      safeguards are necessary in the                         providers fee imposed by section 9010                  the Code
                                                      individual market to prevent                            for the 2014, 2015, and 2016 fee years.
                                                      inappropriate expansion of the                          No fee is due in the 2017 fee year                        Section 3(b)(2) of the EHCCA provides
                                                      exception for category C expatriates.                   because the Consolidated                               that section 4980I of the Code applies to
                                                         Comments are requested on all                        Appropriations Act suspends collection                 employer-sponsored coverage of a
                                                      aspects of the proposed definition of a                 of the health insurance providers fee                  qualified expatriate who is assigned,
                                                      category C expatriate. Comments are                     imposed by section 9010 of ACA for                     rather than transferred, to work in the
                                                      also requested on the time limit for                    2017.                                                  United States. As amended by section
                                                      category C expatriates being expected to                   These proposed regulations provide                  101 of Division P of the Consolidated
                                                      travel or reside in the United States, and              that, for any fee that is due on or after              Appropriations Act, section 4980I of the
                                                      what standards, if any, may be adopted                  the date final regulations are published               Code first applies to coverage provided
                                                      in lieu of the 12-month maximum that                    in the Federal Register, a qualified                   in taxable years beginning after
                                                      would ensure that the definition does                   expatriate enrolled in an expatriate                   December 31, 2019. Comments in
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                                                      not permit inappropriate expansion of                   health plan as defined in these proposed               response to Notice 2015–43 requested
                                                      the exception. For example, comments                    regulations is not a United States health              additional guidance on what it means
                                                      are requested on whether a ‘‘specific                   risk. These proposed regulations also                  for an employer to assign rather than
                                                      and temporary purpose’’ standard                        authorize the IRS to specify in guidance               transfer an employee. These proposed
                                                      should be adopted for category C                        in the Internal Revenue Bulletin the                   regulations do not address the
                                                      expatriates, consistent with the standard               manner of determining excluded                         interaction of the EHCCA and section
                                                      for category A expatriates, or whether                  premiums for qualified expatriates in                  4980I of the Code because the Treasury
                                                      category C expatriates should be                        expatriate health plans. Until the date                Department and the IRS anticipate that
                                                      expected to seek medical care outside                   the final regulations are published in                 this issue will be addressed in future


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                                                      38030                     Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules

                                                      guidance promulgated under section                      opportunity to opt out of the electronic                 Section 2718 of the PHS Act: MLR
                                                      4980I of the Code.                                      reporting if the recipient desires. For                  Program
                                                                                                              example, Treasury and the IRS                               Section 2718 of the PHS Act, as added
                                                      Federal Tax Provision: Section 5000A
                                                      of the Code and Minimum Essential                       specifically request comments on                         by sections 1001 and 10101 of the ACA,
                                                      Coverage                                                whether the ability to provide this                      generally requires health insurance
                                                                                                              notice as part of the enrollment                         issuers to provide rebates to consumers
                                                         The proposed regulations provide                     materials for the coverage would meet                    if issuers do not achieve specified
                                                      that, beginning January 1, 2017,                        these goals.                                             MLRs, as well as to submit an annual
                                                      coverage under an expatriate health
                                                                                                              Federal Tax Provision: PCORTF Fee                        MLR report to HHS. The proposed
                                                      plan that provides coverage for a
                                                                                                                                                                       regulations provide that expatriate
                                                      qualified expatriate qualifies as
                                                                                                                The proposed regulations provide that                  policies described in 45 CFR
                                                      minimum essential coverage for all
                                                                                                              the excise tax under sections 4375 and                   158.120(d)(4) continue to be subject to
                                                      participants in the plan. If the expatriate
                                                                                                              4376 of the Code (the PCORTF fee) does                   the reporting and rebate requirements of
                                                      health plan provides coverage to
                                                                                                              not apply to an expatriate health plan as                45 CFR part 158, but update the
                                                      category A or category B expatriates, the
                                                                                                              defined at 26 CFR 54.9831–1(f)(3).                       description of expatriate policies in 45
                                                      coverage of any participant in the plan
                                                                                                              Section 4375 of the Code limits the                      CFR 158.120(d)(4) to exclude policies
                                                      is treated as an eligible employer-
                                                                                                              application of the fee to policies issued                that are expatriate health plans under
                                                      sponsored plan under section
                                                                                                              to individuals residing in the United                    the EHCCA. Given this modification,
                                                      5000A(f)(2) of the Code. If the expatriate
                                                                                                              States. Existing regulations under                       issuers may find that the number of
                                                      health plan provides coverage to
                                                                                                              sections 4375, 4376, and 4377 of the                     expatriate policies that remain subject to
                                                      category C expatriates, the coverage of
                                                                                                              Code exclude coverage under a plan                       MLR requirements is low, and that it is
                                                      any enrollee in the plan is treated as a
                                                                                                              from the fee if the plan is designed                     administratively burdensome and there
                                                      plan in the individual market under
                                                                                                              specifically to cover primarily                          is no longer a qualitative justification for
                                                      section 5000A(f)(1)(C) of the Code.
                                                                                                              employees who are working and                            continuing separate reporting of such
                                                      Federal Tax Provision: Sections 6055                    residing outside the United States. A                    policies. Therefore, comments are
                                                      and 6056 of the Code                                    comment requested clarification about                    requested on whether the treatment of
                                                        Section 3(b)(2) of the EHCCA permits                                                                           expatriate policies for purposes of the
                                                                                                              the existing PCORTF fee exemption for
                                                      the use of electronic media to provide                                                                           MLR regulations should be amended so
                                                                                                              plans that primarily cover employees
                                                      the statements required under sections                                                                           that expatriate policies that do not meet
                                                                                                              working and residing outside the United
                                                      6055 and 6056 of the Code to                                                                                     the definition of expatriate health plan
                                                                                                              States. Consistent with the provisions of
                                                      individuals for coverage under an                                                                                under the EHCCA would not be
                                                                                                              the EHCCA, the proposed regulations
                                                      expatriate health plan unless the                                                                                required to be reported separately from
                                                                                                              expand the exclusion from the PCORTF                     other health insurance policies.
                                                      primary insured has explicitly refused                  fee to also exclude an expatriate health
                                                      to receive the statement electronically.                                                                            Section 833(c)(5) of the Code, as
                                                                                                              plan regardless of whether the plan                      added by section 9016 of the ACA, and
                                                      The proposed regulations provide that,                  provides coverage for qualified
                                                      for an expatriate health plan, the                                                                               amended by section 102 of Division N
                                                                                                              expatriates residing or working in or                    of the Consolidated and Further
                                                      recipient is treated as having consented                outside the United States if the plan is
                                                      to receive the required statement                                                                                Continuing Appropriations Act, 2015
                                                                                                              an expatriate health plan.                               (Pub. L. 113–235, 128 Stat. 2130),
                                                      electronically unless the recipient has
                                                      explicitly refused to receive the                       Section 1341 of the ACA: Transitional                    provides that section 833(a)(2) and (3)
                                                      statement in an electronic format. In                   Reinsurance Program                                      do not apply to any organization unless
                                                      addition, the proposed regulations                                                                               the organization’s MLR for the taxable
                                                      provide that the recipient may explicitly                 A comment also requested that the                      year was at least 85 percent. In
                                                      refuse either electronically or in a paper              current exclusion under the PCORTF fee                   describing the MLR computation under
                                                      document. For a recipient to be treated                 regulations for individuals working and                  section 833(c)(5), the statute and
                                                      as having consented under this special                  residing outside the United States be                    implementing regulations provide that
                                                      rule, the furnisher must provide a notice               applied to the transitional reinsurance                  the elements in the MLR computation
                                                      in compliance with the general                          fee under section 1341 of the ACA.                       are to be ‘‘as reported under section
                                                      disclosure requirements under sections                  Existing regulations relating to section                 2718 of the Public Service Health Act.’’
                                                      6055 and 6056 that informs the                          1341 of the ACA include an exception                     Accordingly, the proposed regulations
                                                      recipient that the statement will be                    for certain expatriate health plans,29                   under section 2718 of the PHS Act
                                                      furnished electronically unless the                     including expatriate group health                        would effectively apply the EHCCA
                                                      recipient explicitly refuses to consent to              coverage as defined by the Secretary of                  exemption to section 833(c)(5) of the
                                                      receive the statement in electronic form.               HHS and, for the 2015 and 2016 benefit                   Code by carving out expatriate health
                                                      The notice must be provided to the                      years, self-insured group health plans                   plans under the EHCCA from the
                                                      recipient at least 30 days prior to the                 with respect to which enrollment is                      section 833(c)(5) requirements as well.
                                                      due date for furnishing of the first                    limited to participants who reside                       Excepted Benefits
                                                      statement the furnisher intends to                      outside their home country for at least
                                                      furnish electronically to the recipient.                six months of the plan year, and any                     Supplemental Health Insurance
asabaliauskas on DSK3SPTVN1PROD with PROPOSALS




                                                      Absent receipt of this notice, a recipient              covered dependents. HHS solicits                         Coverage
                                                      will not be treated as having consented                 comment on whether amendments are                          The proposed regulations incorporate
                                                      to electronic furnishing of statements.                 needed to 45 CFR 153.400(a)(1)(iii) to                   the guidance from the Affordable Care
                                                      Treasury and IRS request comments on                    clarify the alignment with the EHCCA                     Act Implementation FAQs Part XXIII
                                                      further guidance that will assist issuers               and exempt all expatriate plans from the                 addressing supplemental health
                                                      and plan sponsors in providing this                     requirement to make reinsurance                          insurance products that provide
                                                      notice in the least burdensome manner                   contributions.                                           categories of benefits in addition to
                                                      while still ensuring that the recipient                                                                          those in the primary coverage. Under
                                                      has sufficient information and                            29 45   CFR 153.400(a)(1)(iii).                        the proposed regulations, if group or


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                                                                                Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules                                             38031

                                                      individual supplemental health                          event, loss of baggage or personal                      any application or enrollment materials
                                                      insurance coverage provides benefits for                effects, damages to accommodations or                   provided to enrollees and potential
                                                      items and services not covered by the                   rental vehicles, and sickness, accident,                enrollees at or before the time enrollees
                                                      primary coverage (referred to as                        disability, or death occurring during                   and potential enrollees are given the
                                                      providing ‘‘additional categories of                    travel, provided that the health benefits               opportunity to enroll in the coverage
                                                      benefits’’), the coverage would be                      are not offered on a stand-alone basis                  must include a statement that the
                                                      considered to be designed ‘‘to fill gaps                and are incidental to other coverage. For               coverage is a supplement to, rather than
                                                      in primary coverage,’’ for purposes of                  this purpose, travel insurance does not                 a substitute for, major medical coverage
                                                      being supplemental excepted benefits if                 include major medical plans that                        and that a lack of minimum essential
                                                      none of the benefits provided by the                    provide comprehensive medical                           coverage may result in an additional tax
                                                      supplemental policy are an EHB, as                      protection for travelers with trips lasting             payment. The proposed regulations
                                                      defined for purposes of section 1302(b)                 6 months or longer, including, for                      include specific language that must be
                                                      of the ACA, in the State in which the                   example, those working overseas as an                   used by group health plans and issuers
                                                      coverage is issued. Conversely, if any                  expatriate or military personnel being                  of group health insurance coverage to
                                                      benefit provided by the supplemental                    deployed. This definition is consistent                 satisfy this notice requirement, which is
                                                      policy is an EHB in the State where the                 with the definition of travel insurance                 consistent with the notice requirement
                                                      coverage is issued, the insurance                       under final regulations for the health                  for individual market fixed indemnity
                                                      coverage would not be supplemental                      insurance providers fee imposed by                      coverage under regulations issued by
                                                      excepted benefits under the proposed                    section 9010 of the ACA issued by the                   HHS.31 The Departments request
                                                      regulations. This standard is proposed                  Treasury Department and the IRS,30                      comments on this proposed notice
                                                      to apply only to the extent that the                    which uses a modified version of the                    requirement as well as whether any
                                                      supplemental health insurance provides                  National Association of Insurance                       additional requirements should be
                                                      coverage of additional categories of                    Commissioners (NAIC) definition of                      added to prevent confusion among
                                                      benefits. Supplemental health insurance                 travel insurance.                                       enrollees and potential enrollees
                                                      products that both fill in cost sharing in                                                                      regarding the limited coverage provided
                                                                                                              Hospital Indemnity and Other Fixed
                                                      the primary coverage, such as                                                                                   by hospital indemnity and other fixed
                                                                                                              Indemnity Insurance
                                                      coinsurance or deductibles, and cover                                                                           indemnity insurance. The Departments
                                                      additional categories of benefits that are                 These proposed regulations also                      anticipate that conforming changes will
                                                      not EHB, also would be considered                       include an amendment to the                             be made in the final regulations to
                                                      supplemental excepted benefits under                    ‘‘noncoordinated excepted benefits’’                    ensure the notice language in the
                                                      these proposed regulations provided all                 category as it relates to hospital                      individual market is consistent with the
                                                      other criteria are met.                                 indemnity and other fixed indemnity                     notice language in the group market,
                                                                                                              insurance in the group market. Since the                and solicit comments on this approach.
                                                      Travel Insurance                                        issuance of final regulations defining                     Additionally, the Departments have
                                                         The Departments are aware that                       excepted benefits, the Departments have                 become aware of hospital indemnity or
                                                      certain travel insurance products may                   become aware of some hospital                           other fixed indemnity insurance
                                                      include limited health benefits.                        indemnity and other fixed indemnity                     policies that provide benefits for
                                                      However, these products typically are                   insurance policies that provide                         doctors’ visits at a fixed amount per
                                                      not designed as major medical coverage.                 comprehensive benefits related to health                visit, for prescription drugs at a fixed
                                                      Instead, the risks being insured relate                 care costs. In addition, although                       amount per drug, or for certain services
                                                      primarily to: (1) The interruption or                   hospital indemnity and other fixed                      at a fixed amount per day but in
                                                      cancellation of a trip (2) the loss of                  indemnity insurance under section 2791                  amounts that vary by the type of service.
                                                      baggage or personal effects; (3) damages                of the PHS Act, section 733 of ERISA,                   These types of policies do not meet the
                                                      to accommodations or rental vehicles; or                and section 9832 of the Code is not                     condition that benefits be provided on
                                                      (4) sickness, accident, disability, or                  intended to be major medical coverage,                  a per day (or per other time period, such
                                                      death occurring during travel, with any                 the Departments are aware that some                     as per week) basis. Accordingly, the
                                                      health benefits usually incidental to                   group health plans that provide                         proposed regulations clarify this
                                                      other coverage.                                         coverage through hospital indemnity or                  standard by stating that the amount of
                                                         Section 2791(c)(1)(H) of the PHS Act,                other fixed indemnity insurance                         benefits provided must be determined
                                                      section 733(c)(1)(H) of ERISA, and                      policies that meet the conditions                       without regard to the type of items or
                                                      section 9832(c)(1)(H) of the Code                       necessary to be an excepted benefit have                services received. The proposed
                                                      provide that the Departments may, in                    made representations to participants                    regulations add two examples
                                                      regulations, designate as excepted                      that the coverage is minimum essential                  demonstrating that group health plans
                                                      benefits ‘‘benefits for medical care that               coverage under section 5000A of the                     and issuers of group health insurance
                                                      are secondary or incidental to other                    Code. The Departments are concerned                     coverage that provide coverage through
                                                      insurance benefits.’’ Pursuant to this                  that some individuals may incorrectly                   hospital indemnity or fixed indemnity
                                                      authority, and to clarify which types of                understand these policies to be                         insurance policies that provide benefits
                                                      travel-related insurance products are                   comprehensive major medical coverage                    based on the type of item or services
                                                      excepted benefits under the PHS Act,                    that would be considered minimum                        received do not meet the conditions
                                                      ERISA, and the Code, the proposed                       essential coverage.                                     necessary to be an excepted benefit. The
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                                                      regulations provide that certain travel-                   To avoid confusion among group                       first example would incorporate into
                                                      related products that provide only                      health plan enrollees and potential                     regulations guidance previously
                                                      incidental health benefits are excepted                 enrollees, the proposed regulations                     provided by the Departments in
                                                      benefits. The proposed regulations                      revise the conditions necessary for                     Affordable Care Act Implementation
                                                      define the term ‘‘travel insurance’’ as                 hospital indemnity and other fixed                      FAQs Part XI, which clarified that if a
                                                      insurance coverage for personal risks                   indemnity insurance in the group                        policy provides benefits in varying
                                                      incident to planned travel, which may                   market to be excepted benefits so that                  amounts based on the type of procedure
                                                      include, but is not limited to,
                                                      interruption or cancellation of a trip or                 30 26   CFR 57.2(h)(4).                                 31 45   CFR 148.220(b)(4)(iv).



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                                                      38032                     Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules

                                                      or item received, the policy does not                   Act, ERISA, and the Code. The                          EHBs and pre-existing condition
                                                      satisfy the condition that benefits be                  Departments solicit comments on this                   exclusions, and therefore may not
                                                      provided on a per day (or per other time                issue and on whether, if such policies                 provide meaningful health coverage.
                                                      period, such as per week) basis. The                    are permitted to be considered excepted                Further, because these policies can be
                                                      second example demonstrates that a                      benefits, protections are needed to                    medically underwritten based on health
                                                      hospital indemnity or other fixed                       ensure such policies are not mistaken                  status, healthier individuals may be
                                                      indemnity insurance policy that                         for comprehensive medical coverage.                    targeted for this type of coverage, thus
                                                      provides benefits for certain services at               For example, the Departments solicit                   adversely impacting the risk pool for
                                                      a fixed amount per day, but in varying                  comments on whether to limit the                       ACA-compliant coverage.
                                                      amounts depending on the type of                        number of diseases or illnesses that may                  To address the issue of short-term,
                                                      service, does not meet the condition that               be covered in a specified disease policy               limited-duration insurance being sold as
                                                      benefits be provided on a per day (or per               that is considered to be excepted                      a type of primary coverage, the
                                                      other time period, such as per week)                    benefits or whether issuers should be                  proposed regulations revise the
                                                      basis. The Departments request                          required to disclose that such policies                definition of short-term, limited-
                                                      comments on these examples                              are not minimum essential coverage                     duration insurance so that the coverage
                                                      specifically, as well as on the                         under section 5000A(f) of the Code.                    must be less than three months in
                                                      requirement that hospital indemnity                                                                            duration, including any period for
                                                                                                              Short-Term, Limited-Duration                           which the policyholder renews or has
                                                      and other fixed indemnity insurance in
                                                                                                              Insurance                                              an option to renew with or without the
                                                      the group market that are excepted
                                                      benefits must provide benefits on a per                    Under existing regulations, short-                  issuer’s consent. The proposed
                                                      day (or per other time period, such as                  term, limited-duration insurance means                 regulations also provide that a notice
                                                      per week) basis in an amount that does                  ‘‘health insurance coverage provided                   must be prominently displayed in the
                                                      not vary based on the type of items or                  pursuant to a contract with an issuer                  contract and in any application
                                                      services received. The Departments also                 that has an expiration date specified in               materials provided in connection with
                                                      request comments on whether the                         the contract (taking into account any                  enrollment in such coverage with the
                                                      conditions for hospital indemnity or                    extensions that may be elected by the                  following language: THIS IS NOT
                                                      other fixed indemnity insurance to be                   policyholder without the issuer’s                      QUALIFYING HEALTH COVERAGE
                                                      considered excepted benefits should be                  consent) that is less than 12 months                   (‘‘MINIMUM ESSENTIAL COVERAGE’’)
                                                      more substantively aligned between the                  after the original effective date of the               THAT SATISFIES THE HEALTH
                                                      group and individual markets. For                       contract.’’ 33 Before enactment of the                 COVERAGE REQUIREMENT OF THE
                                                      example, the requirements for hospital                  ACA, short-term, limited-duration                      AFFORDABLE CARE ACT. IF YOU
                                                      indemnity or other fixed indemnity                      insurance was an important means for                   DON’T HAVE MINIMUM ESSENTIAL
                                                      insurance in the individual market                      individuals to obtain health coverage                  COVERAGE, YOU MAY OWE AN
                                                      could be modified to be consistent with                 when transitioning from one job to                     ADDITIONAL PAYMENT WITH YOUR
                                                      the group market provisions of these                    another (and from one group health plan                TAXES.
                                                      proposed regulations by limiting                        to another) or in a similar situation. But                This change would align the
                                                      payment strictly on a per-period basis                  with the guaranteed availability of                    definition more closely with the initial
                                                      and not on a per-service basis.                         coverage and special enrollment period                 intent of the regulation: To refer to
                                                                                                              requirements in the individual health                  coverage intended to fill temporary
                                                      Specified Disease Coverage                              insurance market under the ACA, short-                 coverage gaps when an individual
                                                         The Departments have been asked                      term, limited-duration insurance is no                 transitions between primary coverage.
                                                      whether a policy covering multiple                      longer the only means to obtain                        Further, limiting the coverage to less
                                                      specified diseases or illnesses may be                  transitional coverage.                                 than three months improves
                                                      considered to be excepted benefits. The                    The Departments recently have                       coordination with the exemption from
                                                      statute provides that the noncoordinated                become aware that short-term, limited-                 the individual shared responsibility
                                                      excepted benefits category includes                     duration insurance is being sold to                    provision of section 5000A of the Code
                                                      ‘‘coverage of a specified disease or                    address situations other than the                      for gaps in coverage of less than three
                                                      illness’’ if the coverage meets the                     situations that the exception was                      months (the short coverage gap
                                                      conditions for being offered as                         initially intended to address.34 In some               exemption), 26 CFR 1.5000A–3. Under
                                                      independent, noncoordinated benefits,                   instances individuals are purchasing                   current law, individuals who are
                                                      and the Departments’ implementing                       this coverage as their primary form of                 enrolled in short-term, limited-duration
                                                      regulations identify cancer-only policies               health coverage and, contrary to the                   coverage instead of minimum essential
                                                      as one example of specified disease                     intent of the 12-month coverage                        coverage for three months or more are
                                                      coverage.32 The Departments are                         limitation in the current definition of                generally not eligible for the short
                                                      concerned that individuals who                          short-term, limited-duration insurance,                coverage gap exemption. The proposed
                                                      purchase a specified disease policy                     some issuers are providing renewals of                 regulations help ensure that individuals
                                                      covering multiple diseases or illnesses                 the coverage that extend the duration                  who purchase short-term, limited-
                                                      (including policies that cover one                      beyond 12 months. The Departments are                  duration coverage will still be eligible
                                                      overarching medical condition such as                   concerned that these policies, because                 for the short coverage gap exemption
                                                                                                              they are exempt from market reforms,                   (assuming other requirements are met)
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                                                      ‘‘mental illness’’ as opposed to a
                                                      specific condition such as depression)                  may have significant limitations, such                 during the temporary coverage period.
                                                      may incorrectly believe they are                        as lifetime and annual dollar limits on                   In addition to proposing to reduce the
                                                      purchasing comprehensive medical                                                                               length of short-term, limited-duration
                                                      coverage when, in fact, these polices                     33 26 CFR 54.9801–2, 29 CFR 2590.702–2, 45 CFR       insurance to less than three months, the
                                                      may not include many of the important                   144.103.                                               proposed regulations add the words
                                                                                                                34 See e.g., Mathews, Anna W. ‘‘Sales of Short-
                                                      consumer protections under the PHS                                                                             ‘‘with or’’ in front of ‘‘without the
                                                                                                              Term Health Policies Surge,’’ The Wall Street
                                                                                                              Journal April 10, 2016, available at http://
                                                                                                                                                                     issuer’s consent’’ to address the
                                                        32 26 CFR 54.9831–1(c)(4), 29 CFR 2590.732(c)(4),     www.wsj.com/articles/sales-of-short-term-health-       Departments’ concern that some issuers
                                                      45 CFR 146.145(b)(4) and 148.220(b)(3).                 policies-surge-1460328539.                             are taking liberty with the current


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                                                                                 Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules                                           38033

                                                      definition of short-term, limited-                       consistent with one of the three Federal               the Federal Register. To the extent final
                                                      duration insurance either by                             Employees Health Benefit Program                       regulations or other guidance is more
                                                      automatically renewing such policies or                  (FEHBP) options as defined by 45 CFR                   restrictive on issuers, employers,
                                                      having a simplified reapplication                        156.100(a)(3) or one of the base-                      administrators, and individuals than
                                                      process with the result being that such                  benchmark plans selected by a State or                 these proposed regulations, the final
                                                      coverage lasts much longer than 12                       applied by default pursuant to 45 CFR                  regulations or other guidance will be
                                                      months and serves as an individual’s                     156.100’’ in each of the regulations with              applied without retroactive effect and
                                                      primary coverage but does not contain                    the following: ‘‘In a manner that is                   issuers, employers, administrators, and
                                                      the important protections of the ACA.                    consistent with (1) one of the EHB-                    individuals will be provided sufficient
                                                      As indicated above, this type of                         benchmark plans applicable in a State                  time to come into compliance with the
                                                      coverage should only be sold for the                     under 45 CFR 156.110, and includes                     final regulations.
                                                      purpose of providing coverage on a                       coverage of any additional required
                                                      short-term basis such as filling in                      benefits that are considered essential                 III. Economic Impact and Paperwork
                                                      coverage gaps as a result of transitioning               health benefits consistent with 45 CFR                 Burden
                                                      from one group health plan to another.                   155.170(a)(2); or (2) one of the three                 A. Summary—Department of Labor and
                                                      The addition of the words ‘‘with or’’                    Federal Employees Health Benefit                       Department of Health and Human
                                                      clarifies that short-term, limited-                      Program (FEHBP) options as defined by                  Services
                                                      duration insurance must be less than 3                   45 CFR 156.100(a)(3), supplemented, as
                                                                                                                                                                         As stated above, the proposed
                                                      months in total taking into account any                  necessary, to meet the standards in 45
                                                                                                                                                                      regulations would provide guidance on
                                                      option to renew or to reapply for the                    CFR 156.110.’’ This change reflects the
                                                                                                                                                                      the rules for expatriate health plans,
                                                      same or similar coverage.                                possibility that base-benchmark plans,
                                                         The Departments seek comment on                                                                              expatriate health plan issuers, and
                                                                                                               including the FEHBP plan options,
                                                      this proposal, including information                     could require supplementation under 45                 qualified expatriates under the EHCCA.
                                                      and data on the number of short-term,                    CFR 156.110, and ensures the inclusion                 The EHCCA generally provides that the
                                                      limited-duration insurance policies                      of State-required benefit mandates                     requirements of the ACA do not apply
                                                      offered for sale in the market, the types                enacted on or before December 31, 2011                 with respect to expatriate health plans,
                                                      of individuals who typically purchase                    in accordance with 45 CFR 155.170,                     expatriate health insurance issuers for
                                                      this coverage, and the reasons for which                 which when coupled with a State’s                      coverage under expatriate health plans,
                                                      they purchase it.                                        EHB-benchmark plan, establish the                      and employers in their capacity as plan
                                                                                                               definition of EHB in that State under                  sponsors of expatriate health plans.
                                                      Definition of EHB for Purposes of the                                                                              The proposed regulations address
                                                      Prohibition on Lifetime and Annual                       regulations implementing section
                                                                                                               1302(b) of the ACA.36 The Departments                  how certain requirements relating to
                                                      Limits                                                                                                          minimum essential coverage under
                                                                                                               seek comment on the requirement that,
                                                        On November 18, 2015, the                              when one of the FEHBP plan options is                  section 5000A of the Code, the health
                                                      Departments issued final regulations                     selected as the benchmark, it would be                 care reporting provisions of sections
                                                      implementing section 2711 of the PHS                     supplemented, as needed, to ensure                     6055 and 6056 of the Code, and the
                                                      Act.35 The final regulations provide                     coverage in all ten statutory EHB                      health insurance providers fee imposed
                                                      that, for plan years beginning on or after               categories, and the benchmark plan                     by section 9010 of the ACA continue to
                                                      January 1, 2017, a plan or issuer that is                options that should be available for this              apply subject to certain provisions
                                                      not required to provide EHBs must                        purpose.                                               while providing that the excise tax
                                                      define EHB, for purposes of the                                                                                 under sections 4375 and 4376 of the
                                                      prohibition on lifetime and annual                       Proposed Applicability Date and                        Code do not apply to expatriate health
                                                      dollar limits, in a manner consistent                    Reliance                                               plans.
                                                      with any of the 51 EHB base-benchmark                       Except as otherwise provided herein,                   The proposed regulations also
                                                      plans applicable in a State or the                       these proposed regulations are proposed                propose amendments to the
                                                      District of Columbia, or one of the three                to be applicable for plan years (or, in the            Departments’ regulations concerning
                                                      FEHBP base-benchmarks, as specified                      individual market, policy years)                       excepted benefits, which would specify
                                                      under 45 CFR 156.100.                                    beginning on or after January 1, 2017.                 the conditions for supplemental health
                                                        The final regulations under section                    Issuers, employers, administrators, and                insurance products that are designed ‘‘to
                                                      2711 of the PHS Act include a reference                  individuals are permitted to rely on                   fill gaps in primary coverage’’ by
                                                      to selecting a ‘‘base-benchmark’’ plan, as               these proposed regulations pending the                 providing additional categories of
                                                      specified under 45 CFR 156.100, for                      applicability date of final regulations in             benefits (as opposed to filling in gaps in
                                                      purposes of determining which benefits                                                                          cost sharing) to constitute supplemental
                                                      cannot be subject to lifetime or annual                    36 In the HHS Notice of Benefit and Payment          excepted benefits, and clarify that
                                                      dollar limits. The base-benchmark plan                   Parameters for 2016 published February 27, 2015        certain travel-related insurance products
                                                                                                               (80 FR 10750), HHS instructed States to select a
                                                      selected by a State or applied by default                new base-benchmark plan to take effect beginning
                                                                                                                                                                      that provide only incidental health
                                                      under 45 CFR 156.100, however, may                       with plan or policy years beginning in 2017. The       benefits constitute excepted benefits.
                                                      not reflect the complete definition of                   new final EHB base-benchmark plans selected as a       The proposed regulations also require
                                                      EHB in the applicable State. For that                    result of this process are publicly available at       that, to be considered hospital
                                                                                                               downloads.cms.gov/cciio/
                                                      reason, the Departments propose to                                                                              indemnity or other fixed indemnity
asabaliauskas on DSK3SPTVN1PROD with PROPOSALS




                                                                                                               Final%20List%20of%20BMPs_15_10_21.pdf.
                                                      amend the regulations at 26 CFR                          Additional information about the new base-             insurance in the group market, any
                                                      54.9815–2711(c), 29 CFR 2590.715–                        benchmark plans, including plan documents and          application or enrollment materials
                                                                                                               summaries of benefits, is available at www.cms.gov/    provided to participants at or before the
                                                      2711(c), and 45 CFR 147.126(c) to refer                  CCIIO/Resources/Data-Resources/ehb.html. The
                                                      to the provisions that capture the                       definition of EHB in each of the 50 states and the     time participants are given the
                                                      complete definition of EHB in a State.                   District of Columbia is based on the base-             opportunity to enroll in the coverage
                                                      Specifically, the Departments propose to                 benchmark plan, and takes into account any             must include a statement that the
                                                                                                               additions to the base-benchmark plan, such as
                                                      replace the phrase ‘‘in a manner                         supplementation under 45 CFR 156.110, and State-
                                                                                                                                                                      coverage is a supplement to, rather than
                                                                                                               required benefit mandates in accordance with 45        a substitute for, major medical coverage
                                                        35 80   FR 72192.                                      CFR 155.170.                                           and that a lack of minimum essential


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                                                      38034                     Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules

                                                      coverage may result in an additional tax                   Section 3(f) of Executive Order 12866               health insurance issuers should be
                                                      payment. Further, the regulations clarify               defines a ‘‘significant regulatory action’’            permitted to compete on a level playing
                                                      that hospital indemnity and other fixed                 as an action that is likely to result in a             field in the global marketplace; (2) the
                                                      indemnity insurance must pay a fixed                    final rule—(1) having an annual effect                 global competitiveness of American
                                                      dollar amount per day (or per other time                on the economy of $100 million or more                 companies should be encouraged; and
                                                      period, such as per week) regardless of                 in any one year, or adversely and                      (3) in implementing the health
                                                      the type of items or services received.                 materially affecting a sector of the                   insurance providers fee imposed by
                                                         The regulations also propose revisions               economy, productivity, competition,                    section 9010 of the ACA and other
                                                      to the definition of short-term, limited-               jobs, the environment, public health or                provisions of the ACA, the unique and
                                                      duration insurance so that the coverage                 safety, or state, local or tribal                      multinational features of expatriate
                                                      has to be less than 3 months in duration                governments or communities (also                       health plans and the United States
                                                      (as opposed to the current definition of                referred to as ‘‘economically                          companies that operate such plans and
                                                      less than 12 months in duration), and                   significant’’); (2) creating a serious                 the competitive pressures of such plans
                                                      that a notice must be prominently                       inconsistency or otherwise interfering                 and companies should continue to be
                                                      displayed in the contract and in any                    with an action taken or planned by                     recognized.
                                                      application materials provided in                       another agency; (3) materially altering                   In response to feedback the
                                                      connection with the coverage that                       the budgetary impacts of entitlement                   Departments have received from
                                                      provides that such coverage is not                      grants, user fees, or loan programs or the             stakeholders, the proposed regulations
                                                      minimum essential coverage.                             rights and obligations of recipients                   would also clarify the conditions for
                                                         The proposed regulations also include                thereof; or (4) raising novel legal or                 supplemental health insurance and
                                                      amendments to 45 CFR part 158 to                        policy issues arising out of legal                     travel insurance to be considered
                                                      clarify that the MLR reporting                          mandates, the President’s priorities, or               excepted benefits. These clarifications
                                                      requirements do not apply to expatriate                 the principles set forth in the Executive              will provide health insurance issuers
                                                      health plans under the EHCCA.                           Order.                                                 offering supplemental insurance
                                                                                                                 A regulatory impact analysis (RIA)                  coverage and travel insurance products
                                                         Finally, the proposed regulations
                                                                                                              must be prepared for rules with                        with a clearer understanding of whether
                                                      propose to amend the definition of
                                                                                                              economically significant effects (for                  these types of coverage are subject to the
                                                      ‘‘essential health benefits’’ for purposes
                                                                                                              example, $100 million or more in any 1                 market reforms under title XXVII of the
                                                      of the prohibition of annual and lifetime
                                                                                                              year), and a ‘‘significant’’ regulatory                PHS Act, part 7 of ERISA, and Chapter
                                                      dollar limits for group health plans and
                                                                                                              action is subject to review by the OMB.                100 of the Code. The proposed
                                                      health insurance issuers that are not                   The Departments have determined that                   regulations also would amend the
                                                      required to provide essential health                    this regulatory action is not likely to                definition of short-term, limited-
                                                      benefits.                                               have economic impacts of $100 million                  duration insurance and impose a new
                                                         The Departments are publishing these                 or more in any one year, and therefore                 notice requirement in response to recent
                                                      proposed regulations to implement the                   is not significant within the meaning of               reports that this type of coverage is
                                                      protections intended by the Congress in                 Executive Order 12866. The                             being sold for purposes other than for
                                                      the most economically efficient manner                  Departments expect the impact of these                 which the exclusion for short-term,
                                                      possible. The Departments have                          proposed regulations to be limited                     limited-duration insurance was initially
                                                      examined the effects of this rule as                    because they do not require any                        intended to cover.
                                                      required by Executive Order 13563 (76                   additional action or impose any
                                                      FR 3821, January 21, 2011), Executive                   requirements on issuers, employers and                 2. Summary of Impacts
                                                      Order 12866 (58 FR 51735, September                     plan sponsors.                                            These proposed regulations would
                                                      1993, Regulatory Planning and Review),                                                                         implement the rules for expatriate
                                                      the Regulatory Flexibility Act (RFA)                    1. Need for Regulatory Action                          health plans, expatriate health
                                                      (September 19, 1980, Pub. L. 96–354),                      Consistent with the EHCCA, enacted                  insurance issuers, and qualified
                                                      the Unfunded Mandates Reform Act of                     as Division M of the Consolidated                      expatriates under the EHCCA. The
                                                      1995 (Pub. L. 104–4), Executive Order                   Clarification Continuing Appropriations                proposed regulations also outline the
                                                      13132 on Federalism, and the                            Act, 2015 Public Law 113–235 (128 Stat.                conditions for travel insurance and
                                                      Congressional Review Act (5 U.S.C.                      2130), these proposed regulations                      supplemental insurance coverage to be
                                                      804(2)).                                                provide that the market reform                         considered excepted benefits, and revise
                                                                                                              provisions enacted as part of the ACA                  the definition of short-term, limited-
                                                      B. Executive Orders 12866 and 13563—
                                                                                                              generally do not apply to expatriate                   duration insurance.
                                                      Department of Labor and Department of
                                                                                                              health plans, any employer solely in its                  Based on the NAIC 2014
                                                      Health and Human Services
                                                                                                              capacity as a plan sponsor of an                       Supplemental Health Care Exhibit
                                                         Executive Order 12866 (58 FR 51735)                  expatriate health plan, and any                        Report,37 which generally uses the
                                                      directs agencies to assess all costs and                expatriate health insurance issuer with                definition of expatriate coverage in the
                                                      benefits of available regulatory                        respect to coverage under an expatriate                MLR final rule at 45 CFR
                                                      alternatives and, if regulation is                      health plan. Further, the proposed                     158.120(d)(4),38 there are an estimated
                                                      necessary, to select regulatory                         regulations define the benefit and
                                                      approaches that maximize net benefits                   administrative requirements for
asabaliauskas on DSK3SPTVN1PROD with PROPOSALS




                                                                                                                                                                        37 NAIC, 2014 Supplemental Health Care Exhibit

                                                      (including potential economic,                          expatriate health issuers, expatriate                  Report, Volume 1 (2015), available at http://
                                                      environmental, public health and safety                                                                        www.naic.org/documents/prod_serv_statistical_
                                                                                                              health plans, and qualified expatriates                hcs_zb.pdf.
                                                      effects; distributive impacts; and                      and provide clarification regarding the                   38 Section 45 CFR 158.120(d)(4) defines expatriate
                                                      equity). Executive Order 13563 (76 FR                   applicability of certain fee and reporting             policies as predominantly group health insurance
                                                      3821, January 21, 2011) is supplemental                 requirements under the Code.                           policies that provide coverage to employees,
                                                      to and reaffirms the principles,                           Consistent with section 2 of the                    substantially all of whom are: (1) Working outside
                                                                                                                                                                     their country of citizenship; (2) working outside
                                                      structures, and definitions governing                   EHCCA, these proposed regulations are                  their country of citizenship and outside the
                                                      regulatory review as established in                     necessary to carry out the intent of                   employer’s country of domicile; or (3) non-U.S.
                                                      Executive Order 12866.                                  Congress that (1) American expatriate                  citizens working in their home country.



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                                                                                Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules                                           38035

                                                      eight issuers (one issuer in the small                  have provided the exact text for the                   enhanced; how the burden of complying
                                                      group market and seven issuers in the                   notice. Further, the Departments note                  with the proposed collection of
                                                      large group market) domiciled in the                    that issuers of hospital indemnity and                 information may be minimized,
                                                      United States that provide expatriate                   other fixed indemnity insurance in the                 including through the application of
                                                      health plans for approximately 270,349                  individual market already provide a                    automated collection techniques and
                                                      enrollees. While the Departments                        similar notice.                                        other forms of information technology;
                                                      acknowledge that some expatriate                          As a result, the Departments have                    and estimates of capital or start-up costs
                                                      health insurance issuers and employers                  concluded that the impacts of these                    and costs of operation, maintenance,
                                                      in their capacity as plan sponsor of an                 proposed regulations are not                           and purchase of service to provide
                                                      expatriate health plan may incur costs                  economically significant. The                          information. Comments on the
                                                      in order to comply with certain                         Departments request comments on the                    collection of information should be
                                                      provisions of the EHCCA and these                       assumptions used to evaluate the                       received by August 9, 2016.
                                                      proposed regulations, as discussed                      economic impact of these proposed                        An agency may not conduct or
                                                      below, the Departments believe that                     regulations, including specific data and               sponsor, and a person is not required to
                                                      these costs will be relatively                          information on the number of expatriate                respond to, a collection of information
                                                      insignificant and limited.                              health plans.                                          unless it displays a valid control
                                                         The vast majority of expatriate health                                                                      number assigned by the Office of
                                                      plans described in the EHCCA would                      C. Paperwork Reduction Act                             Management and Budget.
                                                      qualify as expatriate health plans under                1. Department of the Treasury                            Books or records relating to a
                                                      the transitional relief provided in the                                                                        collection of information must be
                                                                                                                 The collection of information in these              retained as long as their contents may
                                                      Departments’ Affordable Care Act
                                                                                                              proposed regulations are in 26 CFR                     become material in the administration
                                                      Implementation FAQs Part XVIII, Q&A–
                                                                                                              1.6055–2(a)(8) and 301.6056–2(a)(8).                   of any internal revenue law. Generally,
                                                      6 and Q&A–7. The FAQs provide that
                                                      expatriate health plans with plan years                 The collection of information in these                 tax returns and tax return information
                                                      ending on or before December 31, 2016                   proposed regulations relates to                        are confidential, as required by 26
                                                      are exempt from the ACA market                          statements required to be furnished to a               U.S.C. 6103.
                                                      reforms and provide that coverage                       responsible individual under section
                                                                                                              6055 of the Code and statements                        2. Department of the Treasury,
                                                      provided under an expatriate group                                                                             Department of Labor, and Department of
                                                      health plan is a form of minimum                        required to be furnished to an employee
                                                                                                              under section 6056 of the Code. The                    Health and Human Services
                                                      essential coverage under section 5000A
                                                      of the Code. The EHCCA permanently                      collection of information in these                        The proposed regulations provide that
                                                      exempts expatriate health plans with                    proposed regulations would, in                         to be considered hospital or other fixed
                                                      plan or policy years beginning on or                    accordance with the EHCCA, permit a                    indemnity excepted benefits in the
                                                      after July 1, 2015 from the ACA market                  furnisher to furnish the required                      group market for plan years beginning
                                                      reform requirements and provides that                   statements electronically unless the                   on or after January 1, 2017, a notice
                                                      coverage provided under an expatriate                   recipient has explicitly refused to                    must be included in any application or
                                                      health plan is a form of minimum                        consent to receive the statement in an                 enrollment materials provided to
                                                      essential coverage under section 5000A                  electronic format. The collection of                   participants at or before the time
                                                      of the Code.                                            information contained in this notice of                participants are given the opportunity to
                                                         Because the Departments believe that                 proposed rulemaking will be taken into                 enroll in the coverage, indicating that
                                                      most, if not all, expatriate health plans               account and submitted to the Office of                 the coverage is a supplement to, rather
                                                      described in the EHCCA would qualify                    Management and Budget in accordance                    than a substitute for major medical
                                                      as expatriate health plans under the                    with the Paperwork Reduction Act of                    coverage and that a lack of minimum
                                                      Departments’ previous guidance, and                     1995 (44 U.S.C. 3507(d)) in connection                 essential coverage may result in an
                                                      the proposed regulations codify the                     with the next review of the collection of              additional tax payment. The proposed
                                                      provisions of the EHCCA by making the                   information for IRS Form 1095–B (OMB                   regulations also provide that to be
                                                      temporary relief in the Departments’                    # 1545–2252) and IRS Form 1095–C                       considered short-term, limited-duration
                                                      Affordable Care Act Implementation                      (OMB # 1545–2251).                                     insurance for policy years beginning on
                                                      FAQs Part XVIII, Q&A–6 and Q&A–7                           Comments on the collection of                       or after January 1, 2017, a notice must
                                                      permanent for specified expatriate                      information should be sent to the Office               be prominently displayed in the
                                                      health plans, the Departments believe                   of Management and Budget, Attn: Desk                   contract and in any application
                                                      that the proposed regulations will result               Officer for the Department of the                      materials, stating that the coverage is
                                                      in only marginal, if any, impact on these               Treasury, Office of Information and                    not minimum essential coverage and
                                                      plans. Furthermore, the Departments                     Regulatory Affairs, Washington, DC                     that failure to have minimum essential
                                                      believe the proposed regulations                        20503, with copies to the Internal                     coverage may result in an additional tax
                                                      outlining the conditions for travel                     Revenue Service, Attn: IRS Reports                     payment. The Departments have
                                                      insurance and supplemental insurance                    Clearance Officer, SE:CAR:MP:T:T:SP,                   provided the exact text for these notice
                                                      coverage to be considered excepted                      Washington, DC 20224. Comments on                      requirements and the language will not
                                                      benefits are consistent with prevailing                 the collection of information should be                need to be customized. The burden
                                                      industry practice and will not result in                received by August 9, 2016. Comments                   associated with these notices is not
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                                                      significant cost to health insurance                    are sought on whether the proposed                     subject to the Paperwork Reduction Act
                                                      issuers of these products.                              collection of information is necessary                 of 1995 in accordance with 5 CFR
                                                         The Departments believe that any                     for the proper performance of the IRS,                 1320.3(c)(2) because they do not contain
                                                      costs incurred by issuers of short-term,                including whether the information will                 a ‘‘collection of information’’ as defined
                                                      limited-duration insurance and hospital                 have practical utility; the accuracy of                in 44 U.S.C. 3502(11).
                                                      indemnity and other fixed indemnity                     the estimated burden associated with
                                                      insurance to include the required notice                the proposed collection of information;                D. Regulatory Flexibility Act
                                                      in application or enrollment materials                  how the quality, utility, and clarity of                 The Regulatory Flexibility Act (5
                                                      will be negligible since the Departments                the information to be collected may be                 U.S.C. 601 et seq.) (RFA) imposes


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                                                      38036                     Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules

                                                      certain requirements with respect to                    E. Special Analysis—Department of the                  1996 (5 U.S.C. 801 et seq.), and, if
                                                      Federal rules that are subject to the                   Treasury                                               finalized, will be transmitted to the
                                                      notice and comment requirements of                        Certain IRS regulations, including this              Congress and to the Comptroller General
                                                      section 553(b) of the Administrative                    one, are exempt from the requirements                  for review in accordance with such
                                                      Procedure Act (5 U.S.C. 551 et seq.) and                of Executive Order 12866, as                           provisions.
                                                      that are likely to have a significant                   supplemented and reaffirmed by                         I. Statement of Availability of IRS
                                                      economic impact on a substantial                        Executive Order 13563. Therefore, a                    Documents
                                                      number of small entities. Unless an                     regulatory impact assessment is not
                                                      agency certifies that a proposed rule is                required. It also has been determined                     IRS Revenue Procedures, Revenue
                                                      not likely to have a significant economic               that section 553(b) of the Administrative              Rulings notices, and other guidance
                                                      impact on a substantial number of small                 Procedure Act (5 U.S.C. Chapter 5) does                cited in this document are published in
                                                      entities, section 603 of RFA requires                   not apply to these regulations. For                    the Internal Revenue Bulletin (or
                                                      that the agency present an initial                      applicability of RFA, see paragraph D of               Cumulative Bulletin) and are available
                                                      regulatory flexibility analysis at the time             this section III.                                      from the Superintendent of Documents,
                                                      of the publication of the notice of                       Pursuant to section 7805(f) of the                   U.S. Government Printing Office,
                                                      proposed rulemaking describing the                      Code, these regulations have been                      Washington, DC 20402, or by visiting
                                                      impact of the rule on small entities and                submitted to the Chief Counsel for                     the IRS Web site at http://www.irs.gov.
                                                      seeking public comment on such                          Advocacy of the Small Business                         IV. Statutory Authority
                                                      impact. Small entities include small                    Administration for comment on their
                                                                                                              impact on small business.                                The Department of the Treasury
                                                      businesses, organizations and
                                                                                                                                                                     regulations are proposed to be adopted
                                                      governmental jurisdictions.                             F. Unfunded Mandates Reform Act                        pursuant to the authority contained in
                                                         The RFA generally defines a ‘‘small                     For purposes of the Unfunded                        sections 7805 and 9833 of the Code.
                                                      entity’’ as (1) a proprietary firm meeting              Mandates Reform Act of 1995 (2 U.S.C.                    The Department of Labor regulations
                                                      the size standards of the Small Business                1501 et seq.), as well as Executive Order              are proposed pursuant to the authority
                                                      Administration (SBA) (13 CFR 121.201);                  12875, these proposed rules do not                     contained in 29 U.S.C. 1135,and 1191c;
                                                      (2) a nonprofit organization that is not                include any Federal mandate that may                   Secretary of Labor’s Order 1–2011, 77
                                                      dominant in its field; or (3) a small                   result in expenditures by State, local, or             FR 1088 (Jan. 9, 2012).
                                                      government jurisdiction with a                          tribal governments, or the private sector,               The Department of Health and Human
                                                      population of less than 50,000. (States                 which may impose an annual burden of                   Services regulations are proposed to be
                                                      and individuals are not included in the                 $146 million adjusted for inflation since              adopted pursuant to the authority
                                                      definition of ‘‘small entity.’’) The                    1995.                                                  contained in sections 2701 through
                                                      Departments use as their measure of                                                                            2763, 2791, and 2792 of the PHS Act (42
                                                      significant economic impact on a                        G. Federalism—Department of Labor                      U.S.C. 300gg through 300gg–63, 300gg–
                                                      substantial number of small entities a                  and Department of Health and Human                     91, and 300gg–92), as amended.
                                                      change in revenues of more than 3 to 5                  Services
                                                                                                                 Executive Order 13132 outlines                      List of Subjects
                                                      percent.
                                                         These proposed regulations are not                   fundamental principles of federalism. It               26 CFR Part 1
                                                                                                              requires adherence to specific criteria by
                                                      likely to impose additional costs on                                                                             Income taxes.
                                                                                                              Federal agencies in formulating and
                                                      small entities. According to SBA size
                                                                                                              implementing policies that have                        26 CFR Part 46
                                                      standards, entities with average annual
                                                                                                              ‘‘substantial direct effects’’ on the                    Excise taxes, Health care, Health
                                                      receipts of $38.5 million or less would
                                                                                                              States, the relationship between the                   insurance, Pensions, Reporting and
                                                      be considered small entities for these
                                                                                                              national government and States, or on                  recordkeeping requirements.
                                                      North American Industry Classification                  the distribution of power and
                                                      System codes. The Departments believe                   responsibilities among the various                     26 CFR Part 54
                                                      that, since the majority of small issuers               levels of government. Federal agencies
                                                      belong to larger holding groups, many if                                                                         Pension and excise taxes.
                                                                                                              promulgating regulations that have
                                                      not all are likely to have non-health                   these federalism implications must                     26 CFR Part 57
                                                      lines of business that would result in                  consult with State and local officials,
                                                      their revenues exceeding $38.5 million.                                                                          Health insurance providers fee.
                                                                                                              and describe the extent of their
                                                      Therefore, the Departments certify that                 consultation and the nature of the                     26 CFR Part 301
                                                      the proposed regulations will not have                  concerns of State and local officials in                 Procedure and administration.
                                                      a significant impact on a substantial                   the preamble to the final regulation.
                                                      number of small entities. In addition,                     In the Departments’ view, these                     29 CFR Part 2590
                                                      section 1102(b) of the Social Security                  proposed regulations do not have                         Continuation coverage, Disclosure,
                                                      Act requires agencies to prepare a                      federalism implications, because they                  Employee benefit plans, Group health
                                                      regulatory impact analysis if a rule may                do not have direct effects on the States,              plans, Health care, Health insurance,
                                                      have a significant economic impact on                   the relationship between the national                  Medical child support, Reporting and
                                                      the operations of a substantial number                  government and States, or on the
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                                                                                                                                                                     recordkeeping requirements.
                                                      of small rural hospitals. This analysis                 distribution of power and
                                                      must conform to the provisions of                                                                              45 CFR Parts 144, 146 and 147
                                                                                                              responsibilities among various levels of
                                                      section 604 of the RFA. These proposed                  government.                                              Health care, Health insurance,
                                                      regulations would not affect small rural                                                                       Reporting and recordkeeping
                                                      hospitals. Therefore, the Departments                   H. Congressional Review Act                            requirements.
                                                      have determined that these proposed                       These proposed regulations are
                                                      regulations would not have a significant                subject to the Congressional Review Act                45 CFR Part 148
                                                      impact on the operations of a substantial               provisions of the Small Business                         Administrative practice and
                                                      number of small rural hospitals.                        Regulatory Enforcement Fairness Act of                 procedure, Health care, Health


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                                                                                Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules                                                38037

                                                      insurance, Penalties, Reporting and                     expatriates described in § 54.9831–                    PART 46—EXCISE TAXES, HEALTH
                                                      recordkeeping requirements.                             1(f)(6)(i) or (ii) of this chapter.                    CARE, HEALTH INSURANCE,
                                                      45 CFR Part 158                                         *      *     *       *     *                           PENSIONS, REPORTING AND
                                                                                                                 (d) * * *                                           RECORDKEEPING
                                                        Health insurance, Medical loss ratio,
                                                      Reporting and rebate requirements.                         (3) Certain expatriate health plans.                ■ 5. The authority citation for part 46
                                                                                                              An expatriate health plan within the                   continues to read as follows:
                                                      John Dalrymple,                                         meaning of § 54.9831–1(f)(3) of this                       Authority: 26 U.S.C. 7805.
                                                      Deputy Commissioner for Services and                    chapter that is not an eligible employer-
                                                      Enforcement, Internal Revenue Service.                  sponsored plan under paragraph                         ■ 6. Section 46.4377–1 is amended by
                                                        Signed this 1st day of June 2016.                     (c)(1)(i)(D) of this section is a plan in the          redesignating paragraph (c) as paragraph
                                                      Phyllis C. Borzi,                                       individual market.                                     (d) and adding new paragraph (c) to
                                                      Assistant Secretary, Employee Benefits                                                                         read as follows:
                                                                                                              *      *     *       *     *
                                                      Security Administration, Department of                                                                         § 46.4377–1.     Definitions and special rules.
                                                      Labor.                                                  ■ 4. Section 1.6055–2 is amended by
                                                        Dated: June 2, 2016.                                  adding paragraph (a)(8) to read as                *    **     *     *
                                                                                                              follows:                                      (c) Treatment of expatriate health
                                                      Andrew M. Slavitt,
                                                                                                                                                         plans. For policy years and plan years
                                                      Acting Administrator, Centers for Medicare              § 1.6055–2 Electronic furnishing of        that end after January 1, 2017, the fees
                                                      & Medicaid Services.                                    statements.
                                                                                                                                                         imposed by sections 4375 and 4376 do
                                                        Dated: June 3, 2016.                                                                             not apply to an expatriate health plan
                                                                                                                 (a) * * *
                                                      Sylvia M. Burwell,                                                                                 within the meaning of § 54.9831–1(f)(3).
                                                                                                                 (8) Special rule for expatriate health
                                                      Secretary, Department of Health and Human
                                                      Services.
                                                                                                              plan coverage—(i) In general. In the case *       *     *     *     *
                                                                                                              of an individual covered under an
                                                      DEPARTMENT OF THE TREASURY                              expatriate health plan (within the         PART 54—PENSION AND EXCISE
                                                                                                              meaning of § 54.9831–1(f)(3) of this       TAXES
                                                      Internal Revenue Service
                                                                                                              chapter), the recipient is treated as      ■ 7. The authority citation for part 54
                                                      Proposed Amendments to the                              having consented under paragraph (a)(2) continues to read in part as follows:
                                                      Regulations                                             of this section unless the recipient has
                                                                                                                                                            Authority: 26 U.S.C. 7805* * *
                                                        Accordingly, 26 CFR parts 1, 46, 54,                  explicitly refused to consent to receive
                                                      57, and 301 are proposed to be amended                  the statement in an electronic format.     ■ 8. Section 54.9801–2 is amended by:
                                                      as follows:                                             The refusal to consent may be made         ■ a. Adding in alphabetical order
                                                                                                              electronically or in a paper document. A definitions for ‘‘expatriate health
                                                      PART 1—INCOME TAXES                                     recipient’s request for a paper statement insurance issuer’’, ‘‘expatriate health
                                                                                                              is treated as an explicit refusal to       plan’’, and ‘‘qualified expatriate;’’
                                                      ■ 1. The authority citation for part 1                  receive the statement in electronic        ■ b. Revising the definition of ‘‘short-
                                                      continues to read in part as follows:                   format. A furnisher relying on this        term, limited-duration insurance’’; and
                                                          Authority: 26 U.S.C. 7805.* * *                     paragraph (a)(8) must satisfy the          ■ c. Adding in alphabetical order a

                                                      ■ 2. Section 1.162–31 is amended by                     requirements of paragraphs (a)(3)          definition for ‘‘travel insurance’’.
                                                                                                              through (7) of this section, except that      The additions and revisions read as
                                                      adding paragraph (b)(5)(v) to read as
                                                      follows:                                                the statement required under paragraph follows:
                                                                                                              (a)(3) must be provided at least 30 days
                                                                                                                                                         § 54.9801–2 Definitions.
                                                      § 1.162–31 The $500,000 deduction                       prior to the time for furnishing under
                                                      limitation for remuneration provided by                 § 1.6055–1(g)(4)(i)(A) of this chapter of  *      *     *     *     *
                                                      certain health insurance providers.                     the first statement that the furnisher        Expatriate health insurance issuer
                                                      *     *     *    *     *                                intends to furnish electronically to the   means an expatriate health insurance
                                                        (b) * * *                                             recipient, and the other requirements of issuer within the meaning of § 54.9831–
                                                        (5) * * *                                             paragraph (a)(3) are modified to reflect   1(f)(2).
                                                        (v) Expatriate health plan coverage.                  that the statement will be furnished          Expatriate health plan means an
                                                      For purposes of this section, amounts                   electronically unless the recipient        expatriate health plan within the
                                                      received in payment for expatriate                      explicitly refuses to consent to receive   meaning of § 54.9831–1(f)(3).
                                                      health plan coverage, as defined in                     the statement in an electronic format.     *      *     *     *     *
                                                      § 54.9831–1(f)(3), are not premiums.                                                                  Qualified expatriate means a qualified
                                                                                                                 (ii) Manner and time of notifying
                                                      *     *     *    *     *                                                                           expatriate within the meaning of
                                                                                                              recipient. The IRS may specify in other
                                                      ■ 3. Section 1.5000A–2 is amended by                                                               § 54.9831–1(f)(6).
                                                                                                              guidance published in the Internal
                                                      adding paragraphs (c)(1)(i)(D) and (d)(3)                                                             Short-term, limited-duration
                                                                                                              Revenue Bulletin the manner and
                                                      to read as follows:                                                                                insurance means health insurance
                                                                                                              timing for the initial notification of
                                                                                                                                                         coverage provided pursuant to a
                                                      § 1.5000A–2      Minimum essential coverage.            recipients that the statement required
                                                                                                                                                         contract with an issuer that:
                                                                                                              under paragraph (a)(3) of this section
                                                      *     *     *     *     *                                                                             (1) Has an expiration date specified in
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                                                                                                              will be furnished electronically unless
                                                        (c) * * *                                                                                        the contract (taking into account any
                                                                                                              the recipient explicitly refuses to
                                                        (1) * * *                                                                                        extensions that may be elected by the
                                                                                                              consent to receive the statement in an
                                                        (i) * * *                                                                                        policyholder with or without the
                                                                                                              electronic format. See
                                                        (D) A group health plan that is an                                                               issuer’s consent) that is less than 3
                                                                                                              § 601.601(d)(2)(ii)(B) of this chapter.
                                                      expatriate health plan within the                                                                  months after the original effective date
                                                      meaning of § 54.9831–1(f)(3) of this                       (iii) Effective/applicability date. The of the contract; and
                                                      chapter if the requirements of                          provisions of this paragraph (a)(8) apply     (2) Displays prominently in the
                                                      § 54.9831–1(f)(3)(i) of this chapter are                as of January 1, 2017.                     contract and in any application
                                                      met by providing coverage for qualified                 *       *     *     *    *                 materials provided in connection with


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                                                      38038                     Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules

                                                      enrollment in such coverage in at least                 its place the reference ‘‘54.9812–1,                      (2) If participants are required to
                                                      14 point type the following: ‘‘THIS IS                  54.9815–1251 through 54.9815–2719A,’’                  reenroll (in either paper or electronic
                                                      NOT QUALIFYING HEALTH                                   and in paragraph (c)(1) by removing the                form) for renewal or reissuance, the
                                                      COVERAGE (‘‘MINIMUM ESSENTIAL                           reference ‘‘54.9811–1T, 54.9812–1T’’                   notice described in paragraph
                                                      COVERAGE’’) THAT SATISFIES THE                          with the phrase ‘‘54.9811–1, 54.9812–1,                (c)(4)(ii)(D)(1) of this section must be
                                                      HEALTH COVERAGE REQUIREMENT                             54.9815–1251 through 54.9815–2719A’’.                  displayed in the reenrollment materials
                                                      OF THE AFFORDABLE CARE ACT. IF                          ■ 11. Section 54.9831–1 is amended:                    that are provided to the participants at
                                                      YOU DON’T HAVE MINIMUM                                  ■ a. In paragraph (c)(2)(vii) by removing              or before the time participants are given
                                                      ESSENTIAL COVERAGE, YOU MAY                             ‘‘and’’ at the end;                                    the opportunity to reenroll in the
                                                      OWE AN ADDITIONAL PAYMENT                               ■ b. In paragraph (c)(2)(viii) by adding               coverage.
                                                      WITH YOUR TAXES.’’                                      ‘‘and’’ at the end;                                       (3) If a notice satisfying the
                                                      *     *     *     *     *                               ■ c. Adding paragraph (c)(2)(ix);                      requirements of this paragraph
                                                         Travel insurance means insurance                     ■ d. Revising paragraph (c)(4)(i);                     (c)(4)(ii)(D) is timely provided to a
                                                      coverage for personal risks incident to                 ■ e. Adding paragraph (c)(4)(ii)(D);                   participant, the obligation to provide the
                                                      planned travel, which may include, but                  ■ f. Revising paragraphs (c)(4)(iii) and               notice is satisfied for both the plan and
                                                      is not limited to, interruption or                      (c)(5)(i)(C); and                                      the issuer.
                                                      cancellation of trip or event, loss of                  ■ g. Adding paragraph (f).                                (iii) Examples. The rules of this
                                                      baggage or personal effects, damages to                    The revisions and additions read as                 paragraph (c)(4) are illustrated by the
                                                      accommodations or rental vehicles, and                  follows:                                               following examples:
                                                      sickness, accident, disability, or death                § 54.9831–1 Special rules relating to group               Example 1. (i) Facts. An employer sponsors
                                                      occurring during travel, provided that                  health plans.                                          a group health plan that provides coverage
                                                      the health benefits are not offered on a                *       *   *     *     *                              through an insurance policy. The policy
                                                      stand-alone basis and are incidental to                                                                        provides benefits only for hospital stays at a
                                                                                                                 (c) * * *                                           fixed percentage of hospital expenses up to
                                                      other coverage. For this purpose, the                      (2) * * *
                                                      term travel insurance does not include                                                                         a maximum of $100 a day.
                                                                                                                 (ix) Travel insurance within the                       (ii) Conclusion. In this Example 1, because
                                                      major medical plans that provide                        meaning of § 54.9801–2 of this section.                the policy pays a percentage of expenses
                                                      comprehensive medical protection for                                                                           incurred rather than a fixed dollar amount
                                                                                                              *       *   *     *     *
                                                      travelers with trips lasting 6 months or                                                                       per day (or per other time period, such as per
                                                                                                                 (4) Noncoordinated benefits—(i)
                                                      longer, including, for example, those                                                                          week), the policy is not hospital indemnity
                                                                                                              Excepted benefits that are not
                                                      working overseas as an expatriate or                                                                           or other fixed indemnity insurance that is an
                                                                                                              coordinated. Coverage for only a
                                                      military personnel being deployed.                                                                             excepted benefit under this paragraph (c)(4).
                                                                                                              specified disease or illness (for example,             This is the result even if, in practice, the
                                                      *     *     *     *     *                               cancer-only policies) or hospital
                                                      ■ 9. Section 54.9815–2711 is amended                                                                           policy pays the maximum of $100 for every
                                                                                                              indemnity or other fixed indemnity                     day of hospitalization.
                                                      by revising paragraph (c) to read as                    insurance is excepted only if the                         Example 2. (i) Facts. An employer
                                                      follows:                                                coverage meets each of the conditions                  sponsors a group health plan that provides
                                                      § 54.9815–2711      No lifetime or annual               specified in paragraph (c)(4)(ii) of this              coverage through an insurance policy. The
                                                      limits.                                                 section.                                               policy provides benefits for doctors’ visits at
                                                                                                                 (ii) * * *                                          $50 per visit, hospitalization at $100 per day,
                                                      *     *     *     *     *                                                                                      various surgical procedures at different dollar
                                                        (c) Definition of essential health                       (D) To be hospital indemnity or other
                                                                                                                                                                     rates per procedure, and prescription drugs at
                                                      benefits. The term ‘‘essential health                   fixed indemnity insurance, the                         $15 per prescription.
                                                      benefits’’ means essential health                       insurance must pay a fixed dollar                         (ii) Conclusion. In this Example 2, for
                                                      benefits under section 1302(b) of the                   amount per day (or per other time                      doctors’ visits, surgery, and prescription
                                                      Patient Protection and Affordable Care                  period, such as per week) of                           drugs, payment is not made on a per-period
                                                      Act and applicable regulations. For this                hospitalization or illness (for example,               basis, but instead is based on whether a
                                                                                                              $100/day) without regard to the amount                 procedure or item is provided, such as
                                                      purpose, a group health plan or a health                                                                       whether an individual has surgery or a doctor
                                                      insurance issuer that is not required to                of expenses incurred or the type of
                                                                                                                                                                     visit or is prescribed a drug, and the amount
                                                      provide essential health benefits under                 items or services received and—
                                                                                                                                                                     of payment varies based on the type of
                                                      section 1302(b) must define ‘‘essential                    (1) The plan or issuer must provide,                procedure or item. Because benefits related to
                                                      health benefits’’ in a manner that is                   in any application or enrollment                       office visits, surgery, and prescription drugs
                                                      consistent with—                                        materials provided to participants at or               are not paid based on a fixed dollar amount
                                                        (1) One of the EHB-benchmark plans                    before the time participants are given                 per day (or per other time period, such as per
                                                      applicable in a State under 45 CFR                      the opportunity to enroll in the                       week), as required under paragraph (c)(4) of
                                                      156.110, and includes coverage of any                   coverage, a notice that prominently                    this section, the policy is not hospital
                                                                                                              displays in at least 14 point type the                 indemnity or other fixed indemnity
                                                      additional required benefits that are                                                                          insurance that is an excepted benefit under
                                                      considered essential health benefits                    following language: ‘‘THIS IS A
                                                                                                                                                                     this paragraph (c)(4).
                                                      consistent with 45 CFR 155.170(a)(2); or                SUPPLEMENT TO HEALTH                                      Example 3. (i) Facts. An employer
                                                        (2) One of the three Federal                          INSURANCE AND IS NOT A                                 sponsors a group health plan that provides
                                                      Employees Health Benefit Program                        SUBSTITUTE FOR MAJOR MEDICAL                           coverage through an insurance policy. The
                                                      (FEHBP) options as defined by 45 CFR                    COVERAGE. THIS IS NOT                                  policy provides benefits for certain services
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                                                      156.100(a)(3), supplemented, as                         QUALIFYING HEALTH COVERAGE                             at a fixed dollar amount per day, but the
                                                      necessary, to meet the standards in 45                  (‘‘MINIMUM ESSENTIAL COVERAGE’’)                       dollar amount varies by the type of service.
                                                      CFR 156.110.                                            THAT SATISFIES THE HEALTH                                 (ii) Conclusion. In this Example 3, because
                                                                                                              COVERAGE REQUIREMENT OF THE                            the policy provides benefits in a different
                                                      *     *     *     *     *                                                                                      amount per day depending on the type of
                                                                                                              AFFORDABLE CARE ACT. IF YOU                            service, rather than one specific dollar
                                                      § 54.9831–1      [Amended]                              DON’T HAVE MINIMUM ESSENTIAL                           amount per day regardless of the type of
                                                      ■ 10. Section 54.9831–1 is amended in                   COVERAGE, YOU MAY OWE AN                               service, the policy is not hospital indemnity
                                                      paragraph (b)(1) by removing the                        ADDITIONAL PAYMENT WITH YOUR                           or other fixed indemnity insurance that is an
                                                      reference ‘‘54.9812–1T’’ and adding in                  TAXES.’’                                               excepted benefit under this paragraph (c)(4).



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                                                                                Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules                                            38039

                                                         (5) * * *                                               (E) Maintains legal and compliance                     (1) In the case of individuals
                                                         (i) * * *                                            resources in three or more countries;                  described in paragraph (f)(6)(i) of this
                                                         (C) Similar supplemental coverage                    and                                                    section, in the United States and in the
                                                      provided to coverage under a group                         (F) Has licenses or other authority to              country or countries from which the
                                                      health plan. To be similar supplemental                 sell insurance in more than two                        individual was transferred or assigned,
                                                      coverage, the coverage must be                          countries, including in the United                     and such other country or countries the
                                                      specifically designed to fill gaps in the               States.                                                Secretary of Health and Human
                                                      primary coverage. The preceding                            (ii) Additional rules. For purposes of              Services, in consultation with the
                                                      sentence is satisfied if the coverage is                meeting the requirements of this                       Secretary of the Treasury and Secretary
                                                      designed to fill gaps in cost sharing in                paragraph (f)(2), two or more entities,                of Labor, may designate;
                                                      the primary coverage, such as                           including one entity that is the                          (2) In the case of individuals
                                                      coinsurance or deductibles, or the                      expatriate health insurance issuer, that               described in paragraph (f)(6)(ii) of this
                                                      coverage is designed to provide benefits                are members of the expatriate health                   section, in the country or countries in
                                                      for items and services not covered by                   insurance issuer’s controlled group (as                which the individual is present in
                                                      the primary coverage and that are not                   determined under § 57.2(c) of this                     connection with his employment, and
                                                      essential health benefits in the State                  chapter) are treated as one expatriate                 such other country or countries the
                                                      where the coverage is issued, or the                    health insurance issuer. Alternatively,                Secretary of Health and Human
                                                      coverage is designed to both fill such                  the requirements of this paragraph (f)(2)              Services, in consultation with the
                                                      gaps in cost sharing under, and cover                   may be satisfied through contracts                     Secretary of the Treasury and Secretary
                                                      such benefits not covered by, the                       between an expatriate health insurance                 of Labor, may designate; or
                                                      primary coverage. Similar supplemental                  issuer and third parties.                                 (3) In the case of individuals
                                                      coverage does not include coverage that                    (3) Definition of expatriate health                 described in paragraph (f)(6)(iii) of this
                                                      becomes secondary or supplemental                       plan. Expatriate health plan means a                   section, in the country or countries the
                                                      only under a coordination-of-benefits                   plan that satisfies the requirements of                Secretary of Health and Human
                                                      provision.                                              paragraphs (f)(3)(i) through (iii) of this             Services, in consultation with the
                                                      *       *    *    *     *                               section.                                               Secretary of the Treasury and Secretary
                                                         (f) Expatriate health plans and                         (i) Substantially all qualified                     of Labor, may designate.
                                                      expatriate health insurance issuers—(1)                 expatriates requirement. Substantially                    (B) The plan sponsor reasonably
                                                      In general. With respect to coverage                    all primary enrollees in the expatriate                believes that benefits provided by the
                                                      under an expatriate health plan, the                    health plan must be qualified                          plan or coverage satisfy the minimum
                                                      requirements of section 9815 of the                     expatriates. For purposes of this                      value requirements of section
                                                      Code and implementing rules and                         paragraph (f)(3)(i), the primary enrollee              36B(c)(2)(C)(ii). For this purpose, a plan
                                                      regulations (incorporating sections 2701                is the individual covered by the plan or               sponsor is permitted to rely on the
                                                      through 2728 of the Public Health                       policy whose eligibility for coverage is               reasonable representations of the issuer
                                                      Service Act) do not apply to—                           not due to that individual’s status as the             or administrator regarding whether
                                                         (i) An expatriate health plan (as                    spouse, dependent, or other beneficiary                benefits offered by the issuer or group
                                                      defined in paragraph (f)(3) of this                     of another covered individual.                         health plan satisfy the minimum value
                                                      section),                                               Notwithstanding the foregoing, an                      requirements unless the plan sponsor
                                                         (ii) An employer, solely in its capacity             individual is not a primary enrollee if                knows or has reason to know that the
                                                      as plan sponsor of an expatriate health                 the individual is not a national of the                benefits fail to satisfy the minimum
                                                      plan, and                                               United States and the individual resides               value requirements.
                                                         (iii) An expatriate health insurance
                                                                                                              in his or her country of citizenship. A                   (C) In the case of a plan or coverage
                                                      issuer (as defined in paragraph (f)(2) of
                                                                                                              plan satisfies the requirement of this                 that provides dependent coverage of
                                                      this section) with respect to coverage
                                                                                                              paragraph (f)(3)(i) for a plan or policy               children, such coverage must be
                                                      under an expatriate health plan.
                                                         (2) Definition of expatriate health                  year only if, on the first day of the plan             available until an individual attains age
                                                      insurance issuer—(i) In general.                        or policy year, less than 5 percent of the             26, unless an individual is the child of
                                                      Expatriate health insurance issuer                      primary enrollees (or less than 5                      a child receiving dependent coverage.
                                                      means a health insurance issuer, within                 primary enrollees if greater) are not                     (D) The plan or coverage is:
                                                      the meaning of § 54.9801–2, that issues                 qualified expatriates.                                    (1) In the case of individuals
                                                      expatriate health plans and that in the                    (ii) Substantially all benefits not                 described in paragraph (f)(6)(i) or (ii) of
                                                      course of its normal business                           excepted benefits requirement.                         this section, a group health plan
                                                      operations—                                             Substantially all of the benefits                      (including health insurance coverage
                                                         (A) Maintains network provider                       provided under the plan or coverage                    offered in connection with a group
                                                      agreements that provide for direct                      must be benefits that are not excepted                 health plan), issued by an expatriate
                                                      claims payments, with health care                       benefits described in § 54.9831–1(c).                  health insurance issuer or administered
                                                      providers in eight or more countries;                      (iii) Additional requirements. To                   by an expatriate health plan
                                                         (B) Maintains call centers in three or               qualify as an expatriate health plan, the              administrator. A group health plan will
                                                      more countries, and accepts calls from                  plan or coverage must also meet the                    not fail to be an expatriate health plan
                                                      customers in eight or more languages;                   following requirements:                                merely because any portion of the
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                                                         (C) Processed at least $1 million in                    (A) The plan or coverage provides                   coverage is provided through a self-
                                                      claims in foreign currency equivalents                  coverage for inpatient hospital services,              insured arrangement.
                                                      during the preceding calendar year,                     outpatient facility services, physician                   (2) In the case of individuals
                                                      determined using the Treasury                           services, and emergency services                       described in paragraph (f)(6)(iii) of this
                                                      Department’s currency exchange rate in                  (comparable to emergency services                      section, health insurance coverage
                                                      effect on the last day of the preceding                 coverage that was described in and                     issued by an expatriate health insurance
                                                      calendar year;                                          offered under section 8903(1) of title 5,              issuer.
                                                         (D) Makes global evacuation/                         United States Code for plan year 2009)                    (E) The plan or coverage offers
                                                      repatriation coverage available;                        in the following locations—                            reimbursements for items or services in


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                                                      38040                     Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules

                                                      local currency in eight or more                            (E) Maintains legal and compliance                  described in this paragraph (f)(6)(ii)
                                                      countries.                                              resources in three or more countries,                  only if the individual is a national of the
                                                         (F) The plan or coverage satisfies the               and                                                    United States who is working outside
                                                      provisions of Chapter 100 and                              (F) Has licenses or other authority to              the United States for at least 180 days
                                                      regulations thereunder as in effect on                  sell insurance in more than two                        in a consecutive 12-month period that
                                                      March 22, 2010. For this purpose, the                   countries, including in the United                     overlaps with a single plan year, or
                                                      plan or coverage is not required to                     States.                                                across two consecutive plan years.
                                                      comply with section 9801(e) (relating to                   (ii) Additional rules. For purposes of                 (iii) Individuals within a group of
                                                      certification of creditable coverage) and               meeting the requirements of this                       similarly situated individuals. (A) An
                                                      underlying regulations. However, to the                 paragraph (f)(4), two or more entities,                individual is described in this
                                                      extent the plan or coverage imposes a                   including one entity that is the                       paragraph (f)(6)(iii) only if:
                                                      preexisting condition exclusion, the                    expatriate health plan administrator,                     (1) The individual is a member of a
                                                                                                              that are members of the expatriate                     group of similarly situated individuals
                                                      plan or coverage must ensure that
                                                                                                              health plan administrator’s controlled                 that is formed for the purpose of
                                                      individuals with prior creditable
                                                                                                              group (as determined under § 57.2(c) of                traveling or relocating internationally in
                                                      coverage who enroll in the plan or
                                                                                                              this chapter) are treated as one                       service of one or more of the purposes
                                                      coverage have an opportunity to
                                                                                                              expatriate health plan administrator.                  listed in section 501(c)(3) or (4), or
                                                      demonstrate that they have creditable
                                                                                                              Alternatively, the requirements of this                similarly situated organizations or
                                                      coverage offsetting the preexisting
                                                                                                              paragraph (f)(4) may be satisfied through              groups. For example, a group of
                                                      condition exclusion.
                                                                                                              contracts between an expatriate health                 students that is formed for purposes of
                                                         (iv) Example. The rule of paragraph                  plan administrator and third parties.                  traveling and studying abroad for a 6-
                                                      (f)(3)(i) of this section is illustrated by                (5) Definition of group health plan.                month period is described in this
                                                      the following example:                                  Group health plan, for purposes of this                paragraph (f)(6)(iii);
                                                         Example. (i) Facts. Business has health              section, means a group health plan as                     (2) In the case of a group organized to
                                                      plan X for 250 U.S. citizens working outside            defined in § 54.9831–1(a).                             travel or relocate outside the United
                                                      of the United States in Country Y. All of the              (6) Definition of qualified expatriate.             States, the individual is expected to
                                                      U.S. citizens working in Country Y satisfy the          Qualified expatriate, for purposes of this             travel or reside outside the United
                                                      requirements to be qualified expatriates                section, means an individual who is
                                                      under § 54.9831–1(f)(6)(ii). In addition to the
                                                                                                                                                                     States for at least 180 days in a
                                                                                                              described in paragraph (f)(6)(i), (ii), or             consecutive 12-month period that
                                                      250 U.S. citizens, Business employs 100                 (iii) of this section.
                                                      citizens of Country Y who reside in Country                                                                    overlaps with the policy year (or in the
                                                                                                                 (i) Individuals transferred or assigned             case of a policy year that is less than 12
                                                      Y and do not satisfy the requirements to be
                                                      qualified expatriates under § 54.9831–
                                                                                                              by their employer to work in the United                months, at least half the policy year);
                                                      1(f)(6)(ii). Health plan X covers both the U.S.         States. An individual is described in                     (3) In the case of a group organized to
                                                      citizens and citizens of Country Y.                     this paragraph (f)(6)(i) only if such                  travel or relocate within the United
                                                         (ii) Conclusion. Health plan X satisfies the         individual has the skills, qualifications,             States, the individual is expected to
                                                      requirement of § 54.9831–1(f)(3)(i) that                job duties, or expertise that has caused               travel or reside in the United States for
                                                      substantially all primary enrollees of an               the individual’s employer to transfer or               not more than 12 months;
                                                      expatriate health plan be qualified                     assign the individual to the United                       (4) The individual is not traveling or
                                                      expatriates because 100 percent of the                  States for a specific and temporary
                                                      primary enrollees are qualified expatriates.                                                                   relocating internationally in connection
                                                                                                              purpose or assignment that is tied to the              with an employment-related purpose;
                                                      The 100 citizens of Country Y who reside in             individual’s employment with such
                                                      Country Y are not treated as primary                                                                           and
                                                      enrollees for purposes of the substantially all
                                                                                                              employer. This paragraph (f)(6)(i)                        (5) The group meets the test for
                                                      requirement of § 54.9831–1(f)(3)(i) because             applies only to an individual who the                  having associational ties under section
                                                      they are not nationals of the United States             plan sponsor has reasonably determined                 2791(d)(3)(B) through (F) of the PHS Act
                                                      and they reside in the country of their                 requires access to health coverage and                 (42 U.S.C. 300gg–91(d)(3)(B) through
                                                      citizenship.                                            other related services and support in                  (F)).
                                                         (4) Definition of expatriate health                  multiple countries, and is offered other                  (B) This paragraph (f)(6)(iii) does not
                                                      plan administrator—(i) In general.                      multinational benefits on a periodic                   apply to a group that is formed
                                                      Expatriate health plan administrator                    basis (such as tax equalization,                       primarily for the sale or purchase of
                                                      means an administrator that in the                      compensation for cross-border moving                   health insurance coverage.
                                                      course of its regular business                          expenses, or compensation to enable the                   (C) If a group of similarly situated
                                                      operations—                                             individual to return to the individual’s               individuals satisfies the requirements of
                                                         (A) Maintains network provider                       home country), and does not apply to                   this paragraph (f)(6)(iii), the Secretary of
                                                      agreements that provide for direct                      any individual who is a national of the                Health and Human Services, in
                                                      claims payments, with health care                       United States. For purposes of this                    consultation with the Secretary and the
                                                      providers in eight or more countries,                   paragraph (f)(6)(i), an individual who is              Secretary of Labor, has determined that
                                                                                                              not expected to travel outside the                     the group requires access to health
                                                         (B) Maintains call centers, in three or              United States at least one time per year               coverage and other related services and
                                                      more countries, and accepts calls from                  during the coverage period would not                   support in multiple countries.
                                                      customers in eight or more languages,                   reasonably require access to health                       (7) Definition of United States. Solely
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                                                         (C) Processed at least $1 million in                 coverage and other related services and                for purposes of this paragraph (f),
                                                      claims in foreign currency equivalents                  support in multiple countries.                         United States means the 50 States, the
                                                      during the preceding calendar year,                     Furthermore, the offer of a one-time de                District of Columbia, and Puerto Rico.
                                                      determined using the Treasury                           minimis benefit would not meet the                        (8) National of the United States. For
                                                      Department’s currency exchange rate in                  standard for the offer of other                        purposes of this paragraph (f), national
                                                      effect on the last day of the preceding                 multinational benefits on a periodic                   of the United States, when referring to
                                                      calendar year,                                          basis.                                                 an individual, has the meaning used in
                                                         (D) Makes global evacuation/                            (ii) Individuals working outside the                the Immigration and Nationality Act (8
                                                      repatriation coverage available,                        United States. An individual is                        U.S.C. 1101 et seq.) and includes U.S.


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                                                                                 Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules                                               38041

                                                      citizens and non-citizen nationals.                      expatriate health plans. The IRS may                   recipient, and the other requirements of
                                                      Thus, for example, an individual born                    specify in other guidance published in                 paragraph (a)(3) are modified to reflect
                                                      in American Samoa is a national of the                   the Internal Revenue Bulletin the                      that the statement will be furnished
                                                      United States at birth.                                  manner of determining excluded                         electronically unless the recipient
                                                      ■ 12. Section 54.9833–1 is amended by                    premiums for qualified expatriates in                  explicitly refuses consent to receive the
                                                      adding a sentence at the end to read as                  expatriate health plans as described in                statement in an electronic format.
                                                      follows:                                                 § 57.2(n)(2).                                            (ii) Manner and time of notifying
                                                                                                               *     *     *    *      *                              recipient. The IRS may specify in other
                                                      § 54.9833–1      Effective dates.                                                                               guidance published in the Internal
                                                                                                               ■ 16. Section 57.10 is amended by
                                                        * * * Notwithstanding the previous                     revising paragraph (a) and adding                      Revenue Bulletin the manner and
                                                      sentence, the definition of ‘‘short-term                 paragraph (c) to read as follows:                      timing for the initial notification of
                                                      limited duration insurance’’ in                                                                                 recipients that the statement required
                                                      §§ 54.9801–2 and 5.9831–1(c)(5)(i)(C)                    § 57.10    Effective/applicability dates.              under paragraph (a)(3) of this section
                                                      and (f) apply for policy years and plan                    (a) In general. Except as provided in                will be furnished electronically unless
                                                      years beginning on or after January 1,                   paragraphs (b) and (c) of this section,                the recipient explicitly refuses to
                                                      2017.                                                    §§ 57.1 through 57.9 apply to any fee                  consent to receive the statement in an
                                                                                                               that is due on or after September 30,                  electronic format. See
                                                      PART 57—HEALTH INSURANCE                                 2014.                                                  § 601.601(d)(2)(ii)(B) of this chapter.
                                                      PROVIDERS FEE                                            *     *     *     *     *                                (iii) Effective/applicability date. The
                                                      ■ 13. The authority citation for part 57                   (c) Qualified expatriates in expatriate              provisions of this paragraph (a)(8) apply
                                                      continues to read in part as follows:                    health plans. Section 57.2(n)(2), the last             as of January 1, 2017.
                                                                                                               sentence of § 57.4(b)(2), and § 57.4(b)(3)             *      *     *     *    *
                                                        Authority: 26 U.S.C. 7805; sec. 9010, Pub.             apply to any fee that is due on or after
                                                      L. 111–148 (124 Stat. 119 (2010)). * * *                                                                        DEPARTMENT OF LABOR
                                                                                                               the date the final regulations are
                                                      ■ 14. Section 57.2 is amended by                         published in the Federal Register. Until               Employee Benefits Security
                                                      revising paragraph (n) to read as                        the date the final regulations are                     Administration
                                                      follows:                                                 published in the Federal Register,
                                                                                                               taxpayers may rely on these rules for                  29 CFR Chapter XXV
                                                      § 57.2   Explanation of terms.                                                                                    For the reasons stated in the
                                                                                                               any fee that is due on or after September
                                                      *       *    *     *     *                               30, 2018.                                              preamble, the Department of Labor
                                                         (n) United States health risk.—(1) In                                                                        proposes to amend 29 CFR part 2590 as
                                                      general. The term United States health                   PART 301—PROCEDURE AND                                 set forth below:
                                                      risk means the health risk of any                        ADMINSTRATION
                                                      individual who is—                                                                                              PART 2590—RULES AND
                                                         (i) A United States citizen;                          ■ 17. The authority citation for part 301              REGULATIONS FOR GROUP HEALTH
                                                         (ii) A resident of the United States                  continues to read in part as follows:                  PLANS
                                                      (within the meaning of section                               Authority: 26 U.S.C. 7805 * * *
                                                                                                                                                                      ■ 19. The authority citation for part
                                                      7701(b)(1)(A)); or                                       ■ 18. Section 301.6056–2 is amended by                 2590 is revised to read as follows:
                                                         (iii) Located in the United States                    adding paragraph (a)(8) to read as
                                                      (within the meaning of paragraph (i) of                                                                           Authority: 29 U.S.C. 1027, 1059, 1135,
                                                                                                               follows:                                               1161–1168, 1169, 1181–1183, 1181 note,
                                                      this section) during the period such
                                                      individual is so located.                                § 301.6056–2.      Electronic furnishing of            1185, 1185a, 1185b, 1191, 1191a, 1191b, and
                                                                                                               statements.                                            1191c; sec. 101(g), Pub. L. 104–191, 110 Stat.
                                                         (2) Qualified expatriates, spouses,
                                                                                                                                                                      1936; sec. 401(b), Pub. L. 105–200, 112 Stat.
                                                      and dependents. The term United States                      (a) * * *                                           645 (42 U.S.C. 651 note); sec. 512(d), Pub. L.
                                                      health risk does not include the health                     (8) Special rule for expatriate health              110–343, 122 Stat. 3881; sec. 1001, 1201, and
                                                      risk of any individual who is a qualified                plan coverage—(i) In general. In the case              1562(e), Pub. L. 111–148, 124 Stat. 119, as
                                                      expatriate (within the meaning of                        of an individual covered under an                      amended by Pub. L. 111–152, 124 Stat. 1029;
                                                      § 54.9831–1(f)(6)) enrolled in an                        expatriate health plan (within the                     Division M, Pub. L. 113–235, 128 Stat. 2130;
                                                      expatriate health plan (within the                       meaning of § 54.9831–1(f)(3) of this                   Secretary of Labor’s Order 1–2011, 77 FR
                                                      meaning of § 54.9831–1(f)(3)). For                       chapter), the recipient is treated as                  1088 (Jan. 9, 2012).
                                                      purposes of this paragraph, a qualified                  having consented under paragraph (a)(2)                ■ 20. Section 2590.701–2 is amended
                                                      expatriate includes any spouse,                          of this section unless the recipient has               by:
                                                      dependent, or any other individual                       explicitly refused to consent to receive               ■ a. Adding in alphabetical order
                                                      enrolled in the expatriate health plan.                  the statement in an electronic format.                 definitions for ‘‘expatriate health
                                                      *       *    *     *     *                               The refusal to consent may be made                     insurance issuer’’, ‘‘expatriate health
                                                      ■ 15. Section 57.4 is amended by adding                  electronically or in a paper document. A               plan’’, and ‘‘qualified expatriate’’;
                                                      a sentence to the end of paragraph (b)(2)                recipient’s request for a paper statement              ■ b. Revising the definition of ‘‘short-
                                                      and adding paragraph (b)(3) to read as                   is treated as an explicit refusal to                   term, limited-duration insurance’’; and
                                                      follows:                                                 receive the statement in electronic                    ■ c. Adding in alphabetical order a
                                                                                                               format. A furnisher relying on this                    definition for ‘‘travel insurance’’.
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                                                      § 57.4   Fee calculation.                                paragraph (a)(8) must satisfy the                        The additions and revisions read as
                                                      *     *    *     *     *                                 requirements of paragraphs (a)(3)                      follows:
                                                        (b) * * *                                              through (7) of this section, except that
                                                        (2) * * * This presumption does not                    the statement required under paragraph                 § 2590.701–2     Definitions.
                                                      apply to excluded premiums for                           (a)(3) must be provided at least 30 days               *     *    *      *    *
                                                      qualified expatriates in expatriate health               prior to the time for furnishing under                    Expatriate health insurance issuer
                                                      plans as described in § 57.2(n)(2).                      § 301.6056–1(g)(4)(i)(A) of this chapter               means an expatriate health insurance
                                                        (3) Manner of determining excluded                     of the first statement that the furnisher              issuer within the meaning of
                                                      premiums for qualified expatriates in                    intends to furnish electronically to the               § 2590.732(f)(2).


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                                                      38042                     Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules

                                                         Expatriate health plan means an                      provide essential health benefits under                SUBSTITUTE FOR MAJOR MEDICAL
                                                      expatriate health plan within the                       section 1302(b) must define ‘‘essential                COVERAGE. THIS IS NOT
                                                      meaning of § 2590.732(f)(3).                            health benefits’’ in a manner that is                  QUALIFYING HEALTH COVERAGE
                                                      *      *    *     *     *                               consistent with—                                       (‘‘MINIMUM ESSENTIAL COVERAGE’’)
                                                         Qualified expatriate means a qualified                  (1) One of the EHB-benchmark plans                  THAT SATISFIES THE HEALTH
                                                      expatriate within the meaning of                        applicable in a State under 45 CFR                     COVERAGE REQUIREMENT OF THE
                                                      § 2590.732(f)(6).                                       156.110, and includes coverage of any                  AFFORDABLE CARE ACT. IF YOU
                                                         Short-term, limited-duration                         additional required benefits that are                  DON’T HAVE MINIMUM ESSENTIAL
                                                      insurance means health insurance                        considered essential health benefits                   COVERAGE, YOU MAY OWE AN
                                                      coverage provided pursuant to a                         consistent with 45 CFR 155.170(a)(2); or               ADDITIONAL PAYMENT WITH YOUR
                                                      contract with an issuer that:                              (2) One of the three Federal                        TAXES.’’
                                                         (1) Has an expiration date specified in              Employees Health Benefit Program                          (2) If participants are required to
                                                      the contract (taking into account any                   (FEHBP) options as defined by 45 CFR                   reenroll (in either paper or electronic
                                                      extensions that may be elected by the                   156.100(a)(3), supplemented, as                        form) for renewal or reissuance, the
                                                      policyholder with or without the                        necessary, to meet the standards in 45                 notice described in paragraph
                                                      issuer’s consent) that is less than 3                   CFR 156.110.                                           (c)(4)(ii)(D)(1) of this section must be
                                                      months after the original effective date                *      *     *    *     *                              displayed in the reenrollment materials
                                                      of the contract; and                                    ■ 22. Section 2590.732 is amended:                     that are provided to the participants at
                                                         (2) Displays prominently in the                      ■ a. In paragraph (c)(2)(vii) by removing              or before the time participants are given
                                                      contract and in any application                         ‘‘and’’ at the end;                                    the opportunity to reenroll in the
                                                      materials provided in connection with                   ■ b. In paragraph (c)(2)(viii) by adding               coverage.
                                                      enrollment in such coverage in at least                 ‘‘and’’ at the end;                                       (3) If a notice satisfying the
                                                      14 point type the following: ‘‘THIS IS                  ■ c. Adding paragraph (c)(2)(ix);                      requirements of this paragraph
                                                      NOT QUALIFYING HEALTH                                   ■ d. Revising paragraph (c)(4)(i);                     (c)(4)(ii)(D) is timely provided to a
                                                      COVERAGE (‘‘MINIMUM ESSENTIAL                           ■ e. Adding paragraph (c)(4)(ii)(D);                   participant, the obligation to provide the
                                                                                                              ■ f. Revising paragraphs (c)(4)(iii) and               notice is satisfied for both the plan and
                                                      COVERAGE’’) THAT SATISFIES THE
                                                      HEALTH COVERAGE REQUIREMENT                             (c)(5)(i)(C); and                                      the issuer.
                                                                                                              ■ g. Adding paragraph (f).                                (iii) Examples. The rules of this
                                                      OF THE AFFORDABLE CARE ACT. IF
                                                                                                                 The revisions and additions read as                 paragraph (c)(4) are illustrated by the
                                                      YOU DON’T HAVE MINIMUM
                                                                                                              follows:                                               following examples:
                                                      ESSENTIAL COVERAGE, YOU MAY
                                                      OWE AN ADDITIONAL PAYMENT                               § 2590.732 Special rules relating to group                Example 1. (i) Facts. An employer sponsors
                                                      WITH YOUR TAXES.’’                                      health plans.                                          a group health plan that provides coverage
                                                                                                                                                                     through an insurance policy. The policy
                                                      *      *    *     *     *                               *       *   *     *     *                              provides benefits only for hospital stays at a
                                                         Travel insurance means insurance                        (c) * * *                                           fixed percentage of hospital expenses up to
                                                      coverage for personal risks incident to                    (2) * * *                                           a maximum of $100 a day.
                                                      planned travel, which may include, but                     (ix) Travel insurance, within the                      (ii) Conclusion. In this Example 1, because
                                                      is not limited to, interruption or                      meaning of § 2590.701–2 of this part.                  the policy pays a percentage of expenses
                                                      cancellation of trip or event, loss of                  *       *   *     *     *                              incurred rather than a fixed dollar amount
                                                      baggage or personal effects, damages to                    (4) Noncoordinated benefits—(i)                     per day (or per other time period, such as per
                                                                                                                                                                     week), the policy is not hospital indemnity
                                                      accommodations or rental vehicles, and                  Excepted benefits that are not                         or other fixed indemnity insurance that is an
                                                      sickness, accident, disability, or death                coordinated. Coverage for only a                       excepted benefit under this paragraph (c)(4).
                                                      occurring during travel, provided that                  specified disease or illness (for example,             This is the result even if, in practice, the
                                                      the health benefits are not offered on a                cancer-only policies) or hospital                      policy pays the maximum of $100 for every
                                                      stand-alone basis and are incidental to                 indemnity or other fixed indemnity                     day of hospitalization.
                                                      other coverage. For this purpose, the                   insurance is excepted only if the                         Example 2. (i) Facts. An employer sponsors
                                                      term travel insurance does not include                  coverage meets each of the conditions                  a group health plan that provides coverage
                                                                                                                                                                     through an insurance policy. The policy
                                                      major medical plans that provide                        specified in paragraph (c)(4)(ii) of this              provides benefits for doctors’ visits at $50 per
                                                      comprehensive medical protection for                    section.                                               visit, hospitalization at $100 per day, various
                                                      travelers with trips lasting 6 months or                   (ii) * * *                                          surgical procedures at different dollar rates
                                                      longer, including, for example, those                      (D) To be hospital indemnity or other               per procedure, and prescription drugs at $15
                                                      working overseas as an expatriate or                    fixed indemnity insurance, the                         per prescription.
                                                      military personnel being deployed.                      insurance must pay a fixed dollar                         (ii) Conclusion. In this Example 2, for
                                                                                                              amount per day (or per other time                      doctors’ visits, surgery, and prescription
                                                      *      *    *     *     *                                                                                      drugs, payment is not made on a per-period
                                                      ■ 21. Section 2590.715–2711 is                          period, such as per week) of
                                                                                                                                                                     basis, but instead is based on whether a
                                                      amended by revising paragraph (c) to                    hospitalization or illness (for example,
                                                                                                                                                                     procedure or item is provided, such as
                                                      read as follows:                                        $100/day) without regard to the amount                 whether an individual has surgery or a doctor
                                                                                                              of expenses incurred or the type of                    visit or is prescribed a drug, and the amount
                                                      § 2590.715–2711      No lifetime or annual              items or services received and—                        of payment varies based on the type of
                                                      limits.                                                    (1) The plan or issuer must provide,                procedure or item. Because benefits related to
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                                                      *     *     *     *     *                               in any application or enrollment                       office visits, surgery, and prescription drugs
                                                        (c) Definition of essential health                    materials provided to participants at or               are not paid based on a fixed dollar amount
                                                      benefits. The term ‘‘essential health                   before the time participants are given                 per day (or per other time period, such as per
                                                      benefits’’ means essential health                       the opportunity to enroll in the                       week), as required under paragraph (c)(4) of
                                                                                                                                                                     this section, the policy is not hospital
                                                      benefits under section 1302(b) of the                   coverage, a notice that prominently                    indemnity or other fixed indemnity
                                                      Patient Protection and Affordable Care                  displays in at least 14 point type the                 insurance that is an excepted benefit under
                                                      Act and applicable regulations. For this                following language: ‘‘THIS IS A                        this paragraph (c)(4).
                                                      purpose, a group health plan or a health                SUPPLEMENT TO HEALTH                                      Example 3. (i) Facts. An employer sponsors
                                                      insurance issuer that is not required to                INSURANCE AND IS NOT A                                 a group health plan that provides coverage



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                                                                                Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules                                            38043

                                                      through an insurance policy. The policy                    (B) Maintains call centers in three or              plan or coverage must also meet the
                                                      provides benefits for certain services at a             more countries, and accepts calls from                 following requirements:
                                                      fixed dollar amount per day, but the dollar             customers in eight or more languages;                     (A) The plan or coverage provides
                                                      amount varies by the type of service.                      (C) Processed at least $1 million in                coverage for inpatient hospital services,
                                                         (ii) Conclusion. In this Example 3, because          claims in foreign currency equivalents                 outpatient facility services, physician
                                                      the policy provides benefits in a different
                                                      amount per day depending on the type of
                                                                                                              during the preceding calendar year,                    services, and emergency services
                                                      service, rather than one specific dollar                determined using the Treasury                          (comparable to emergency services
                                                      amount per day regardless of the type of                Department’s currency exchange rate in                 coverage that was described in and
                                                      service, the policy is not hospital indemnity           effect on the last day of the preceding                offered under section 8903(1) of title 5,
                                                      or other fixed indemnity insurance that is an           calendar year;                                         United States Code for plan year 2009)
                                                      excepted benefit under this paragraph (c)(4).              (D) Makes global evacuation/                        in the following locations—
                                                         (5) * * *                                            repatriation coverage available;                          (1) In the case of individuals
                                                                                                                 (E) Maintains legal and compliance                  described in paragraph (f)(6)(i) of this
                                                         (i) * * *
                                                         (C) Similar supplemental coverage                    resources in three or more countries;                  section, in the United States and in the
                                                      provided to coverage under a group                      and                                                    country or countries from which the
                                                                                                                 (F) Has licenses or other authority to              individual was transferred or assigned,
                                                      health plan. To be similar supplemental
                                                                                                              sell insurance in more than two                        and such other country or countries the
                                                      coverage, the coverage must be
                                                                                                              countries, including in the United                     Secretary of Health and Human
                                                      specifically designed to fill gaps in the
                                                                                                              States.                                                Services, in consultation with the
                                                      primary coverage. The preceding                            (ii) Additional rules. For purposes of              Secretary of the Treasury and Secretary
                                                      sentence is satisfied if the coverage is                meeting the requirements of this                       of Labor, may designate;
                                                      designed to fill gaps in cost sharing in                paragraph (f)(2), two or more entities,                   (2) In the case of individuals
                                                      the primary coverage, such as                           including one entity that is the                       described in paragraph (f)(6)(ii) of this
                                                      coinsurance or deductibles, or the                      expatriate health insurance issuer, that               section, in the country or countries in
                                                      coverage is designed to provide benefits                are members of the expatriate health                   which the individual is present in
                                                      for items and services not covered by                   insurance issuer’s controlled group (as                connection with his employment, and
                                                      the primary coverage and that are not                   determined under 26 CFR 57.2(c)) are                   such other country or countries the
                                                      essential health benefits in the State                  treated as one expatriate health                       Secretary of Health and Human
                                                      where the coverage is issued, or the                    insurance issuer. Alternatively, the                   Services, in consultation with the
                                                      coverage is designed to both fill such                  requirements of this paragraph (f)(2)                  Secretary of the Treasury and Secretary
                                                      gaps in cost sharing under, and cover                   may be satisfied through contracts                     of Labor, may designate; or
                                                      such benefits not covered by, the                       between an expatriate health insurance                    (3) In the case of individuals
                                                      primary coverage. Similar supplemental                  issuer and third parties.                              described in paragraph (f)(6)(iii) of this
                                                      coverage does not include coverage that                    (3) Definition of expatriate health                 section, in the country or countries the
                                                      becomes secondary or supplemental                       plan. Expatriate health plan means a                   Secretary of Health and Human
                                                      only under a coordination-of-benefits                   plan that satisfies the requirements of                Services, in consultation with the
                                                      provision.                                              paragraphs (f)(3)(i) through (iii) of this             Secretary of the Treasury and Secretary
                                                      *       *    *    *     *                               section.                                               of Labor, may designate.
                                                         (f) Expatriate health plans and                         (i) Substantially all qualified                        (B) The plan sponsor reasonably
                                                      expatriate health insurance issuers—(1)                 expatriates requirement. Substantially                 believes that benefits provided by the
                                                      In general. With respect to coverage                    all primary enrollees in the expatriate                plan or coverage satisfy the minimum
                                                      under an expatriate health plan, the                    health plan must be qualified                          value requirements of Internal Revenue
                                                      requirements of section 715 of ERISA                    expatriates. For purposes of this                      Code section 36B(c)(2)(C)(ii). For this
                                                      and implementing rules and regulations                  paragraph (f)(3)(i), the primary enrollee              purpose, a plan sponsor is permitted to
                                                      (incorporating sections 2701 through                    is the individual covered by the plan or               rely on the reasonable representations of
                                                      2728 of the Public Health Service Act)                  policy whose eligibility for coverage is               the issuer or administrator regarding
                                                      do not apply to—                                        not due to that individual’s status as the             whether benefits offered by the issuer or
                                                         (i) An expatriate health plan (as                    spouse, dependent, or other beneficiary                group health plan satisfy the minimum
                                                      defined in paragraph (f)(3) of this                     of another covered individual.                         value requirements unless the plan
                                                      section),                                               Notwithstanding the foregoing, an                      sponsor knows or has reason to know
                                                         (ii) An employer, solely in its capacity             individual is not a primary enrollee if                that the benefits fail to satisfy the
                                                      as plan sponsor of an expatriate health                 the individual is not a national of the                minimum value requirements.
                                                      plan, and                                               United States and the individual resides                  (C) In the case of a plan or coverage
                                                         (iii) An expatriate health insurance                 in his or her country of citizenship. A                that provides dependent coverage of
                                                      issuer (as defined in paragraph (f)(2) of               plan satisfies the requirement of this                 children, such coverage must be
                                                      this section) with respect to coverage                  paragraph (f)(3)(i) for a plan or policy               available until an individual attains age
                                                      under an expatriate health plan.                        year only if, on the first day of the plan             26, unless an individual is the child of
                                                         (2) Definition of expatriate health                  or policy year, less than 5 percent of the             a child receiving dependent coverage.
                                                      insurance issuer—(i) In general.                        primary enrollees (or less than 5                         (D) The plan or coverage is:
                                                      Expatriate health insurance issuer                      primary enrollees if greater) are not                     (1) In the case of individuals
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                                                      means a health insurance issuer, within                 qualified expatriates.                                 described in paragraph (f)(6)(i) or (ii) of
                                                      the meaning of § 2590.701–2, that issues                   (ii) Substantially all benefits not                 this section, a group health plan
                                                      expatriate health plans and that in the                 excepted benefits requirement.                         (including health insurance coverage
                                                      course of its normal business                           Substantially all of the benefits                      offered in connection with a group
                                                      operations—                                             provided under the plan or coverage                    health plan), issued by an expatriate
                                                         (A) Maintains network provider                       must be benefits that are not excepted                 health insurance issuer or administered
                                                      agreements that provide for direct                      benefits described in § 2590.732(c).                   by an expatriate health plan
                                                      claims payments, with health care                          (iii) Additional requirements. To                   administrator. A group health plan will
                                                      providers in eight or more countries;                   qualify as an expatriate health plan, the              not fail to be an expatriate health plan


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                                                      38044                     Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules

                                                      merely because any portion of the                       during the preceding calendar year,                    Furthermore, the offer of a one-time de
                                                      coverage is provided through a self-                    determined using the Treasury                          minimis benefit would not meet the
                                                      insured arrangement.                                    Department’s currency exchange rate in                 standard for the offer of other
                                                         (2) In the case of individuals                       effect on the last day of the preceding                multinational benefits on a periodic
                                                      described in paragraph (f)(6)(iii) of this              calendar year,                                         basis.
                                                      section, health insurance coverage                         (D) Makes global evacuation/                           (ii) Individuals working outside the
                                                      issued by an expatriate health insurance                repatriation coverage available,                       United States. An individual is
                                                      issuer.                                                    (E) Maintains legal and compliance                  described in this paragraph (f)(6)(ii)
                                                         (E) The plan or coverage offers                      resources in three or more countries,                  only if the individual is a national of the
                                                      reimbursements for items or services in                 and                                                    United States who is working outside
                                                      local currency in eight or more                            (F) Has licenses or other authority to              the United States for at least 180 days
                                                      countries.                                              sell insurance in more than two                        in a consecutive 12-month period that
                                                         (F) The plan or coverage satisfies the               countries, including in the United                     overlaps with a single plan year, or
                                                      provisions of this part as in effect on                 States.                                                across two consecutive plan years.
                                                      March 22, 2010. For this purpose, the                      (ii) Additional rules. For purposes of                 (iii) Individuals within a group of
                                                      plan or coverage is not required to                     meeting the requirements of this                       similarly situated individuals. (A) An
                                                      comply with section 701(e) (relating to                 paragraph (f)(4), two or more entities,                individual is described in this
                                                      certification of creditable coverage) and               including one entity that is the                       paragraph (f)(6)(iii) only if:
                                                      underlying regulations. However, to the                 expatriate health plan administrator,                     (1) The individual is a member of a
                                                      extent the plan or coverage imposes a                   that are members of the expatriate                     group of similarly situated individuals
                                                      preexisting condition exclusion, the                    health plan administrator’s controlled                 that is formed for the purpose of
                                                      plan or coverage must ensure that                       group (as determined under 26 CFR                      traveling or relocating internationally in
                                                      individuals with prior creditable                       57.2(c)) are treated as one expatriate                 service of one or more of the purposes
                                                      coverage who enroll in the plan or                      health plan administrator. Alternatively,              listed in Internal Revenue Code section
                                                      coverage have an opportunity to                         the requirements of this paragraph (f)(4)              501(c)(3) or (4), or similarly situated
                                                      demonstrate that they have creditable                   may be satisfied through contracts                     organizations or groups. For example, a
                                                      coverage offsetting the preexisting                     between an expatriate health plan                      group of students that is formed for
                                                      condition exclusion.                                    administrator and third parties.                       purposes of traveling and studying
                                                         (iv) Example. The rule of paragraph                     (5) Definition of group health plan.                abroad for a 6-month period is described
                                                      (f)(3)(i) of this section is illustrated by             Group health plan, for purposes of this                in this paragraph (f)(6)(iii);
                                                      the following example:                                  section, means a group health plan as                     (2) In the case of a group organized to
                                                                                                              defined in § 2590.732(a).                              travel or relocate outside the United
                                                         Example. (i) Facts. Business has health                 (6) Definition of qualified expatriate.
                                                      plan X for 250 U.S. citizens working outside                                                                   States, the individual is expected to
                                                      of the United States in Country Y. All of the
                                                                                                              Qualified expatriate, for purposes of this             travel or reside outside the United
                                                      U.S. citizens working in Country Y satisfy the          section, means an individual who is                    States for at least 180 days in a
                                                      requirements to be qualified expatriates                described in paragraph (f)(6)(i), (ii) or              consecutive 12-month period that
                                                      under § 2590.732(f)(6)(ii). In addition to the          (iii) of this section.                                 overlaps with the policy year (or in the
                                                      250 U.S. citizens, Business employs 100                    (i) Individuals transferred or assigned
                                                                                                                                                                     case of a policy year that is less than 12
                                                      citizens of Country Y who reside in Country             by their employer to work in the United
                                                      Y and do not satisfy the requirements to be                                                                    months, at least half the policy year);
                                                                                                              States. An individual is described in                     (3) In the case of a group organized to
                                                      qualified expatriates under                             this paragraph (f)(6)(i) only if such
                                                      § 2590.732(f)(6)(ii). Health plan X covers both                                                                travel or relocate within the United
                                                      the U.S. citizens and citizens of Country Y.
                                                                                                              individual has the skills, qualifications,             States, the individual is expected to
                                                         (ii) Conclusion. Health plan X satisfies the         job duties, or expertise that has caused               travel or reside in the United States for
                                                      requirement of § 2590.732(f)(3)(i) that                 the individual’s employer to transfer or               not more than 12 months;
                                                      substantially all primary enrollees of an               assign the individual to the United                       (4) The individual is not traveling or
                                                      expatriate health plan be qualified                     States for a specific and temporary                    relocating internationally in connection
                                                      expatriates because 100 percent of the                  purpose or assignment that is tied to the
                                                      primary enrollees are qualified expatriates.
                                                                                                                                                                     with an employment-related purpose;
                                                                                                              individual’s employment with such                      and
                                                      The 100 citizens of Country Y who reside in             employer. This paragraph (f)(6)(i)
                                                      Country Y are not treated as primary                                                                              (5) The group meets the test for
                                                      enrollees for purposes of the substantially all         applies only to an individual who the                  having associational ties under section
                                                      requirement of § 2590.732(f)(3)(i) because              plan sponsor has reasonably determined                 2791(d)(3)(B) through (F) of the PHS Act
                                                      they are not nationals of the United States             requires access to health coverage and                 (42 U.S.C. 300gg–91(d)(3)(B) through
                                                      and they reside in the country of their                 other related services and support in                  (F)).
                                                      citizenship.                                            multiple countries, and is offered other                  (B) This paragraph (f)(6)(iii) does not
                                                        (4) Definition of expatriate health                   multinational benefits on a periodic                   apply to a group that is formed
                                                      plan administrator—(i) In general.                      basis (such as tax equalization,                       primarily for the sale or purchase of
                                                      Expatriate health plan administrator                    compensation for cross-border moving                   health insurance coverage.
                                                      means an administrator that in the                      expenses, or compensation to enable the                   (C) If a group of similarly situated
                                                      course of its regular business                          individual to return to the individual’s               individuals satisfies the requirements of
                                                                                                              home country), and does not apply to                   this paragraph (f)(6)(iii), the Secretary of
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                                                      operations—
                                                        (A) Maintains network provider                        any individual who is a national of the                Health and Human Services, in
                                                      agreements that provide for direct                      United States. For purposes of this                    consultation with the Secretary and the
                                                      claims payments, with health care                       paragraph (f)(6)(i), an individual who is              Secretary of the Treasury, has
                                                      providers in eight or more countries,                   not expected to travel outside the                     determined that the group requires
                                                        (B) Maintains call centers, in three or               United States at least one time per year               access to health coverage and other
                                                      more countries, and accepts calls from                  during the coverage period would not                   related services and support in multiple
                                                      customers in eight or more languages,                   reasonably require access to health                    countries.
                                                        (C) Processed at least $1 million in                  coverage and other related services and                   (7) Definition of United States. Solely
                                                      claims in foreign currency equivalents                  support in multiple countries.                         for purposes of this paragraph (f),


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                                                                                  Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules                                            38045

                                                      United States means the 50 States, the                       Short-term, limited-duration                           (b) * * *
                                                      District of Columbia, and Puerto Rico.                    insurance means health insurance                          (2) * * *
                                                         (8) National of the United States. For                 coverage provided pursuant to a                           (ix) Travel insurance, within the
                                                      purposes of this paragraph (f), national                  contract with an issuer that:                          meaning of § 144.103 of this subchapter.
                                                      of the United States, when referring to                      (1) Has an expiration date specified in             *       *    *      *     *
                                                      an individual, has the meaning used in                    the contract (taking into account any                     (4) Noncoordinated benefits—(i)
                                                      the Immigration and Nationality Act (8                    extensions that may be elected by the                  Excepted benefits that are not
                                                      U.S.C. 1101 et seq.) and includes U.S.                    policyholder with or without the                       coordinated. Coverage for only a
                                                      citizens and non-citizen nationals.                       issuer’s consent) that is less than 3                  specified disease or illness (for example,
                                                      Thus, for example, an individual born                     months after the original effective date               cancer-only policies) or hospital
                                                      in American Samoa is a national of the                    of the contract; and                                   indemnity or other fixed indemnity
                                                      United States at birth.                                      (2) Displays prominently in the                     insurance is excepted only if the
                                                      ■ 23. Section 2590.736 is amended by                      contract and in any application                        coverage meets each of the conditions
                                                      adding a sentence at the end to read as                   materials provided in connection with                  specified in paragraph (b)(4)(ii) of this
                                                      follows:                                                  enrollment in such coverage in at least                section.
                                                                                                                14 point type the following: ‘‘THIS IS                    (ii) * * *
                                                      § 2590.736       Applicability dates.                     NOT QUALIFYING HEALTH                                     (D) To be hospital indemnity or other
                                                        * * * Notwithstanding the previous                      COVERAGE (‘‘MINIMUM ESSENTIAL                          fixed indemnity insurance, the
                                                      sentences, the definition of ‘‘short-term,                COVERAGE’’) THAT SATISFIES THE                         insurance must pay a fixed dollar
                                                      limited-duration insurance’’ in                           HEALTH COVERAGE REQUIREMENT                            amount per day (or per other time
                                                      §§ 2590.701–2 and 2590.732(c)(5)(i)(C)                    OF THE AFFORDABLE CARE ACT. IF                         period, such as per week) of
                                                      and (f) apply for plan years beginning                    YOU DON’T HAVE MINIMUM                                 hospitalization or illness (for example,
                                                      on or after January 1, 2017.                              ESSENTIAL COVERAGE, YOU MAY                            $100/day) without regard to the amount
                                                      DEPARTMENT OF HEALTH AND                                  OWE AN ADDITIONAL PAYMENT                              of expenses incurred or the type of
                                                      HUMAN SERVICES                                            WITH YOUR TAXES.’’                                     items or services received and—
                                                                                                                *      *    *     *     *                                 (1) The plan or issuer must provide,
                                                      45 CFR Chapter 1
                                                                                                                   Travel insurance means insurance                    in any application or enrollment
                                                        For the reasons stated in the                           coverage for personal risks incident to                materials provided to participants at or
                                                      preamble, the Department of Health and                    planned travel, which may include, but                 before the time participants are given
                                                      Human Services proposes to amend 45                       is not limited to, interruption or                     the opportunity to enroll in the
                                                      CFR parts 144, 146, 147, 148, and 158                     cancellation of trip or event, loss of                 coverage, a notice that prominently
                                                      as set forth below:                                       baggage or personal effects, damages to                displays in at least 14 point type the
                                                                                                                accommodations or rental vehicles, and                 following language: ‘‘THIS IS A
                                                      PART 144—REQUIREMENTS                                     sickness, accident, disability, or death               SUPPLEMENT TO HEALTH
                                                      RELATING TO HEALTH INSURANCE                              occurring during travel, provided that                 INSURANCE AND IS NOT A
                                                      COVERAGE                                                  the health benefits are not offered on a               SUBSTITUTE FOR MAJOR MEDICAL
                                                      ■ 24. The authority citation for part 144                 stand-alone basis and are incidental to                COVERAGE. THIS IS NOT
                                                      continues to read as follows:                             other coverage. For this purpose, the                  QUALIFYING HEALTH COVERAGE
                                                        Authority: Secs. 2701 through 2763, 2791,
                                                                                                                term travel insurance does not include                 (‘‘MINIMUM ESSENTIAL COVERAGE’’)
                                                      and 2792 of the Public Health Service Act,                major medical plans that provide                       THAT SATISFIES THE HEALTH
                                                      42 U.S.C. 300gg through 300gg–63, 300gg–91,               comprehensive medical protection for                   COVERAGE REQUIREMENT OF THE
                                                      and 300gg–92.                                             travelers with trips lasting 6 months or               AFFORDABLE CARE ACT. IF YOU
                                                      ■ 25. Section 144.103 is amended by:                      longer, including, for example, those                  DON’T HAVE MINIMUM ESSENTIAL
                                                      ■ a. Adding in alphabetical order                         working overseas as an expatriate or                   COVERAGE, YOU MAY OWE AN
                                                      definitions for ‘‘expatriate health                       military personnel being deployed.                     ADDITIONAL PAYMENT WITH YOUR
                                                      insurance issuer’’, ‘‘expatriate health                   *      *    *     *     *                              TAXES.’’
                                                      plan’’, and ‘‘qualified expatriate’’;                                                                               (2) If participants are required to
                                                      ■ b. Revising the definition of ‘‘short-                  PART 146—REQUIREMENTS FOR THE                          reenroll (in either paper or electronic
                                                      term, limited-duration insurance’’; and                   GROUP HEALTH INSURANCE                                 form) for renewal or reissuance, the
                                                      ■ c. Adding in alphabetical order a                       MARKET                                                 notice described in paragraph
                                                      definition for ‘‘travel insurance’’.                      ■ 26. The authority citation for part 146              (b)(4)(ii)(D)(1) of this section must be
                                                        The additions and revision read as                      continues to read as follows:                          displayed in the reenrollment materials
                                                      follows:                                                                                                         that are provided to the participants at
                                                                                                                  Authority: Secs. 2702 through 2705, 2711             or before the time participants are given
                                                      § 144.103    Definitions.                                 through 2723, 2791, and 2792 of the Public             the opportunity to reenroll in the
                                                                                                                Health Service Act (42 U.S.C. 300gg–1
                                                      *     *     *     *     *                                                                                        coverage.
                                                                                                                through 300gg–5, 300gg–11 through 300gg–
                                                         Expatriate health insurance issuer                     23, 300gg–91, and 300gg–92.                               (3) If a notice satisfying the
                                                      means an expatriate health insurance                                                                             requirements of this paragraph
                                                      issuer within the meaning of                              ■ 27. Section 146.145 is amended by:                   (b)(4)(ii)(D) is timely provided to a
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                                                      § 147.170(b) of this subchapter.                          ■ a. Adding paragraph (b)(2)(ix);                      participant, the obligation to provide the
                                                         Expatriate health plan means an                        ■ b. Revising paragraph (b)(4)(i);                     notice is satisfied for both the plan and
                                                      expatriate health plan within the                         ■ c. Adding paragraph (b)(4)(ii)(D); and
                                                                                                                                                                       the issuer.
                                                                                                                ■ d. Revising paragraph (b)(5)(i)(C).
                                                      meaning of § 147.170(c) of this                                                                                     (iii) Examples. The rules of this
                                                                                                                  The additions and revisions read as
                                                      subchapter.                                                                                                      paragraph (b)(4) are illustrated by the
                                                                                                                follows:
                                                      *     *     *     *     *                                                                                        following examples:
                                                         Qualified expatriate means a qualified                 § 146.145 Special rules relating to group                Example 1. (i) Facts. An employer sponsors
                                                      expatriate within the meaning of                          health plans.                                          a group health plan that provides coverage
                                                      § 147.170(f) of this subchapter.                          *      *      *       *      *                         through an insurance policy. The policy



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                                                      38046                     Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules

                                                      provides benefits only for hospital stays at a          coverage does not include coverage that                this section) with respect to coverage
                                                      fixed percentage of hospital expenses up to             becomes secondary or supplemental                      under an expatriate health plan.
                                                      a maximum of $100 a day.                                only under a coordination-of-benefits                     (b) Definition of expatriate health
                                                         (ii) Conclusion. In this Example 1, because          provision.                                             insurance issuer—(1) In general.
                                                      the policy pays a percentage of expenses
                                                                                                              *    *     *    *     *                                Expatriate health insurance issuer
                                                      incurred rather than a fixed dollar amount
                                                      per day (or per other time period, such as per                                                                 means a health insurance issuer, within
                                                      week), the policy is not hospital indemnity             PART 147—HEALTH INSURANCE                              the meaning of § 144.103 of this
                                                      or other fixed indemnity insurance that is an           REFORM REQUIREMENTS FOR THE                            subchapter, that issues expatriate health
                                                      excepted benefit under this paragraph (b)(4).           GROUP AND INDIVIDUAL HEALTH                            plans and that in the course of its
                                                      This is the result even if, in practice, the            INSURANCE MARKETS                                      normal business operations—
                                                      policy pays the maximum of $100 for every                                                                         (i) Maintains network provider
                                                      day of hospitalization.                                 ■ 28. The authority citation for part 147              agreements that provide for direct
                                                         Example 2. (i) Facts. An employer sponsors           continues to read as follows:                          claims payments, with health care
                                                      a group health plan that provides coverage                Authority: Secs. 2701 through 2763, 2791,            providers in eight or more countries;
                                                      through an insurance policy. The policy                 and 2792 of the Public Health Service Act (42             (ii) Maintains call centers in three or
                                                      provides benefits for doctors’ visits at $50 per        U.S.C. 300gg through 300gg–63, 300gg–91,
                                                      visit, hospitalization at $100 per day, various
                                                                                                                                                                     more countries, and accepts calls from
                                                                                                              and 300gg–92), as amended.                             customers in eight or more languages;
                                                      surgical procedures at different dollar rates
                                                      per procedure, and prescription drugs at $15            ■ 29. Section 147.126 is amended by                       (iii) Processed at least $1 million in
                                                      per prescription.                                       revising paragraph (c) to read as follows:             claims in foreign currency equivalents
                                                         (ii) Conclusion. In this Example 2, for                                                                     during the preceding calendar year,
                                                      doctors’ visits, surgery, and prescription              § 147.126    No lifetime or annual limits.             determined using the Treasury
                                                      drugs, payment is not made on a per-period              *     *     *     *     *                              Department’s currency exchange rate in
                                                      basis, but instead is based on whether a                  (c) Definition of essential health                   effect on the last day of the preceding
                                                      procedure or item is provided, such as                  benefits. The term ‘‘essential health                  calendar year;
                                                      whether an individual has surgery or a doctor           benefits’’ means essential health                         (iv) Makes global evacuation/
                                                      visit or is prescribed a drug, and the amount           benefits under section 1302(b) of the                  repatriation coverage available;
                                                      of payment varies based on the type of
                                                                                                              Patient Protection and Affordable Care                    (v) Maintains legal and compliance
                                                      procedure or item. Because benefits related to
                                                      office visits, surgery, and prescription drugs          Act and applicable regulations. For this               resources in three or more countries;
                                                      are not paid based on a fixed dollar amount             purpose, a group health plan or a health               and
                                                      per day (or per other time period, such as per          insurance issuer that is not required to                  (vi) Has licenses or other authority to
                                                      week), as required under paragraph (b)(4) of            provide essential health benefits under                sell insurance in more than two
                                                      this section, the policy is not hospital                section 1302(b) must define ‘‘essential                countries, including in the United
                                                      indemnity or other fixed indemnity                      health benefits’’ in a manner that is                  States.
                                                      insurance that is an excepted benefit under             consistent with—                                          (2) Additional rules. For purposes of
                                                      this paragraph (b)(4).                                    (1) One of the EHB-benchmark plans                   meeting the requirements of this
                                                         Example 3. (i) Facts. An employer sponsors           applicable in a State under 45 CFR                     paragraph (b), two or more entities,
                                                      a group health plan that provides coverage                                                                     including one entity that is the
                                                      through an insurance policy. The policy
                                                                                                              156.110, and includes coverage of any
                                                      provides benefits for certain services at a             additional required benefits that are                  expatriate health insurance issuer, that
                                                      fixed dollar amount per day, but the dollar             considered essential health benefits                   are members of the expatriate health
                                                      amount varies by the type of service.                   consistent with 45 CFR 155.170(a)(2); or               insurance issuer’s controlled group (as
                                                         (ii) Conclusion. In this Example 3, because            (2) One of the three Federal                         determined under 26 CFR 57.2(c)) are
                                                      the policy provides benefits in a different             Employees Health Benefit Program                       treated as one expatriate health
                                                      amount per day depending on the type of                 (FEHBP) options as defined by 45 CFR                   insurance issuer. Alternatively, the
                                                      service, rather than one specific dollar                156.100(a)(3), supplemented, as                        requirements of this paragraph (b) may
                                                      amount per day regardless of the type of                necessary, to meet the standards in 45                 be satisfied through contracts between
                                                      service, the policy is not hospital indemnity                                                                  an expatriate health insurance issuer
                                                                                                              CFR 156.110.
                                                      or other fixed indemnity insurance that is an
                                                      excepted benefit under this paragraph (b)(4).           *     *     *     *     *                              and third parties.
                                                                                                              ■ 30. Section 147.170 is added to read                    (c) Definition of expatriate health
                                                        (5) * * *                                             as follows:                                            plan. Expatriate health plan means a
                                                        (i) * * *                                                                                                    plan that satisfies the requirements of
                                                        (C) Similar supplemental coverage                     § 147.170 Expatriate health plans and                  paragraphs (c)(1) through (3) of this
                                                      provided to coverage under a group                      expatriate health insurance issuers.                   section.
                                                      health plan. To be similar supplemental                   (a) In general. With respect to                         (1) Substantially all qualified
                                                      coverage, the coverage must be                          coverage under an expatriate health                    expatriates requirement. Substantially
                                                      specifically designed to fill gaps in the               plan, the requirements of (including any               all primary enrollees in the expatriate
                                                      primary coverage. The preceding                         amendment made by) the Patient                         health plan must be qualified
                                                      sentence is satisfied if the coverage is                Protection and Affordable Care Act and                 expatriates. For purposes of this
                                                      designed to fill gaps in cost sharing in                of title I and subtitle B of title II of the           paragraph (c)(1), the primary enrollee is
                                                      the primary coverage, such as                           Health Care and Education and                          the individual covered by the plan or
                                                      coinsurance or deductibles, or the                      Reconciliation Act of 2010, and                        policy whose eligibility for coverage is
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                                                      coverage is designed to provide benefits                implementing rules and regulations do                  not due to that individual’s status as the
                                                      for items and services not covered by                   not apply to—                                          spouse, dependent, or other beneficiary
                                                      the primary coverage and that are not                      (1) An expatriate health plan (as                   of another covered individual.
                                                      essential health benefits in the State                  defined in paragraph (c) of this section),             Notwithstanding the foregoing, an
                                                      where the coverage is issued, or the                       (2) An employer, solely in its capacity             individual is not a primary enrollee if
                                                      coverage is designed to both fill such                  as plan sponsor of an expatriate health                the individual is not a national of the
                                                      gaps in cost sharing under, and cover                   plan, and                                              United States and the individual resides
                                                      such benefits not covered by, the                          (3) An expatriate health insurance                  in his or her country of citizenship. A
                                                      primary coverage. Similar supplemental                  issuer (as defined in paragraph (b) of                 plan satisfies the requirement of this


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                                                                                Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules                                                38047

                                                      paragraph (c)(1) for a plan or policy year                 (iii) In the case of a plan or coverage             enrollees for purposes of the substantially all
                                                      only if, on the first day of the plan or                that provides dependent coverage of                    requirement of § 147.170(c)(1) because they
                                                      policy year, less than 5 percent of the                 children, such coverage must be                        are not nationals of the United States and
                                                      primary enrollees (or less than 5                       available until an individual attains age              they reside in the country of their
                                                                                                                                                                     citizenship.
                                                      primary enrollees if greater) are not                   26, unless an individual is the child of
                                                      qualified expatriates.                                  a child receiving dependent coverage.                     (d) Definition of expatriate health
                                                         (2) Substantially all benefits not                      (iv) The plan or coverage is:                       plan administrator—(1) In general.
                                                      excepted benefits requirement.                             (A) In the case of individuals                      Expatriate health plan administrator
                                                      Substantially all of the benefits                       described in paragraphs (f)(1) or (f)(2) of            means an administrator that in the
                                                      provided under the plan or coverage                     this section, a group health plan                      course of its regular business
                                                      must be benefits that are not excepted                  (including health insurance coverage                   operations—
                                                      benefits described in § 146.145(b) and                  offered in connection with a group                        (i) Maintains network provider
                                                      § 148.220 of this subchapter.                           health plan), issued by an expatriate                  agreements that provide for direct
                                                         (3) Additional requirements. To                      health insurance issuer or administered                claims payments, with health care
                                                      qualify as an expatriate health plan, the               by an expatriate health plan                           providers in eight or more countries,
                                                      plan or coverage must also meet the                     administrator. A group health plan will                   (ii) Maintains call centers, in three or
                                                      following requirements:                                 not fail to be an expatriate health plan               more countries, and accepts calls from
                                                         (i) The plan or coverage provides                    merely because any portion of the                      customers in eight or more languages,
                                                                                                              coverage is provided through a self-                      (iii) Processed at least $1 million in
                                                      coverage for inpatient hospital services,
                                                                                                              insured arrangement.                                   claims in foreign currency equivalents
                                                      outpatient facility services, physician
                                                                                                                 (B) In the case of individuals                      during the preceding calendar year,
                                                      services, and emergency services
                                                                                                              described in paragraph (f)(3) of this                  determined using the Treasury
                                                      (comparable to emergency services
                                                                                                              section, health insurance coverage                     Department’s currency exchange rate in
                                                      coverage that was described in and
                                                                                                              issued by an expatriate health insurance               effect on the last day of the preceding
                                                      offered under section 8903(1) of title 5,
                                                                                                              issuer.                                                calendar year,
                                                      United States Code for plan year 2009)
                                                                                                                 (v) The plan or coverage offers                        (iv) Makes global evacuation/
                                                      in the following locations—
                                                                                                              reimbursements for items or services in                repatriation coverage available,
                                                         (A) In the case of individuals                                                                                 (v) Maintains legal and compliance
                                                      described in paragraph (f)(1) of this                   local currency in eight or more
                                                                                                              countries.                                             resources in three or more countries,
                                                      section, in the United States and in the                                                                       and
                                                      country or countries from which the                        (vi) The plan or coverage satisfies the
                                                                                                              provisions of title XXVII of the Public                   (vi) Has licenses or other authority to
                                                      individual was transferred or assigned,                                                                        sell insurance in more than two
                                                      and such other country or countries the                 Health Service Act (42 U.S.C. 300gg et
                                                                                                              seq.) and regulations thereunder as in                 countries, including in the United
                                                      Secretary of Health and Human                                                                                  States.
                                                      Services, in consultation with the                      effect on March 22, 2010. For this
                                                                                                              purpose, the plan or coverage is not                      (2) Additional rules. For purposes of
                                                      Secretary of the Treasury and Secretary                                                                        meeting the requirements of this
                                                      of Labor, may designate;                                required to comply with section 2701(e)
                                                                                                              (relating to certification of creditable               paragraph (d), two or more entities,
                                                         (B) In the case of individuals                                                                              including one entity that is the
                                                      described in paragraph (f)(2) of this                   coverage) and underlying regulations.
                                                                                                              However, to the extent the plan or                     expatriate health plan administrator,
                                                      section, in the country or countries in                                                                        that are members of the expatriate
                                                      which the individual is present in                      coverage imposes a preexisting
                                                                                                              condition exclusion, the plan or                       health plan administrator’s controlled
                                                      connection with his employment, and                                                                            group (as determined under 26 CFR
                                                      such other country or countries the                     coverage must ensure that individuals
                                                                                                              with prior creditable coverage who                     57.2(c)) are treated as one expatriate
                                                      Secretary of Health and Human                                                                                  health plan administrator. Alternatively,
                                                      Services, in consultation with the                      enroll in the plan or coverage have an
                                                                                                              opportunity to demonstrate that they                   the requirements of this paragraph (d)
                                                      Secretary of the Treasury and Secretary                                                                        may be satisfied through contracts
                                                      of Labor, may designate; or                             have creditable coverage offsetting the
                                                                                                              preexisting condition exclusion.                       between an expatriate health plan
                                                         (C) In the case of individuals                                                                              administrator and third parties.
                                                      described in paragraph (f)(3) of this                      (v) Example. The rule of paragraph
                                                                                                                                                                        (e) Definition of group health plan.
                                                      section, in the country or countries the                (c)(1) of this section is illustrated by the
                                                                                                                                                                     Group health plan, for purposes of this
                                                      Secretary of Health and Human                           following example:
                                                                                                                                                                     section, means a group health plan as
                                                      Services, in consultation with the                        Example. (i) Facts. Business has health              defined in § 146.145(a) of this
                                                      Secretary of the Treasury and Secretary                 plan X for 250 U.S. citizens working outside           subchapter.
                                                      of Labor, may designate.                                of the United States in Country Y. All of the             (f) Definition of qualified expatriate.
                                                         (ii) The plan sponsor reasonably                     U.S. citizens working in Country Y satisfy the
                                                                                                              requirements to be qualified expatriates
                                                                                                                                                                     Qualified expatriate, for purposes of this
                                                      believes that benefits provided by the                  under § 147.170(f)(2). In addition to the 250          section, means an individual who is
                                                      plan or coverage satisfy the minimum                    U.S. citizens, Business employs 100 citizens           described in paragraph (f)(1), (2), or (3)
                                                      value requirements of section                           of Country Y who reside in Country Y and               of this section.
                                                      36B(c)(2)(C)(ii) of the Internal Revenue                do not satisfy the requirements to be                     (1) Individuals transferred or assigned
                                                      Code. For this purpose, a plan sponsor                  qualified expatriates under § 147.170(f).              by their employer to work in the United
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                                                      is permitted to rely on the reasonable                  Health plan X covers both the U.S. citizens            States. An individual is described in
                                                      representations of the issuer or                        and citizens of Country Y.                             this paragraph (f)(1) only if such
                                                      administrator regarding whether                           (ii) Conclusion. Health plan X satisfies the         individual has the skills, qualifications,
                                                      benefits offered by the issuer or group                 requirement of § 147.170(c)(1) that                    job duties, or expertise that has caused
                                                                                                              substantially all primary enrollees of an
                                                      health plan satisfy the minimum value                   expatriate health plan be qualified
                                                                                                                                                                     the individual’s employer to transfer or
                                                      requirements unless the plan sponsor                    expatriates because 100 percent of the                 assign the individual to the United
                                                      knows or has reason to know that the                    primary enrollees are qualified expatriates.           States for a specific and temporary
                                                      benefits fail to satisfy the minimum                    The 100 citizens of Country Y who reside in            purpose or assignment that is tied to the
                                                      value requirements.                                     Country Y are not treated as primary                   individual’s employment with such


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                                                      38048                     Federal Register / Vol. 81, No. 112 / Friday, June 10, 2016 / Proposed Rules

                                                      employer. This paragraph (f)(1) applies                 consecutive 12-month period that                         Authority: Secs. 2701 through 2763, 2791,
                                                      only to an individual who the plan                      overlaps with the policy year (or in the               and 2792 of the Public Health Service Act (42
                                                      sponsor has reasonably determined                       case of a policy year that is less than 12             U.S.C. 300gg through 300gg–63, 300gg–91,
                                                      requires access to health coverage and                  months, at least half the policy year);                and 300gg–92), as amended.
                                                      other related services and support in                      (C) In the case of a group organized                ■ 32. Section 148.220 is amended by
                                                      multiple countries, and is offered other                to travel or relocate within the United                adding paragraph (a)(9) to read as
                                                      multinational benefits on a periodic                    States, the individual is expected to                  follows:
                                                      basis (such as tax equalization,                        travel or reside in the United States for
                                                      compensation for cross-border moving                    not more than 12 months;                               § 148.220   Excepted benefits.
                                                      expenses, or compensation to enable the                    (D) The individual is not traveling or              *     *    *     *    *
                                                      individual to return to the individual’s                relocating internationally in connection
                                                      home country), and does not apply to                                                                             (a) * * *
                                                                                                              with an employment-related purpose;
                                                      any individual who is a national of the                 and                                                      (9) Travel insurance, within the
                                                      United States. For purposes of this                        (E) The group meets the test for                    meaning of § 144.103 of this subchapter.
                                                      paragraph (f)(1), an individual who is                  having associational ties under section                *     *    *     *    *
                                                      not expected to travel outside the                      2791(d)(3)(B) through (F) of the Public
                                                      United States at least one time per year                Health Service Act (42 U.S.C. 300gg–                   PART 158—ISSUER USE OF PREMIUM
                                                      during the coverage period would not                    91(d)(3)(B) through (F)).                              REVENUE: REPORTING AND REBATE
                                                      reasonably require access to health                        (ii) This paragraph (f)(3) does not                 REQUIREMENTS
                                                      coverage and other related services and                 apply to a group that is formed
                                                      support in multiple countries.                          primarily for the sale or purchase of                  ■ 33. The authority citation for part 158
                                                      Furthermore, the offer of a one-time de                 health insurance coverage.                             continues to read as follows:
                                                      minimis benefit would not meet the                         (iii) If a group of similarly situated                Authority: Section 2718 of the Public
                                                      standard for the offer of other                         individuals satisfies the requirements of              Health Service Act (42 U.S.C. 300gg–18), as
                                                      multinational benefits on a periodic                    this paragraph (f)(3), the Secretary, in               amended.
                                                      basis.                                                  consultation with the Secretary of the
                                                         (2) Individuals working outside the                  Treasury and the Secretary of Labor, has               ■ 34. Section 158.120 is amended by
                                                      United States. An individual is                         determined that the group requires                     revising paragraph (d)(4) to read as
                                                      described in this paragraph (f)(2) only if              access to health coverage and other                    follows:
                                                      the individual is a national of the                     related services and support in multiple               § 158.120   Aggregate Reporting.
                                                      United States who is working outside                    countries.
                                                      the United States for at least 180 days                                                                        *      *    *     *    *
                                                                                                                 (g) Definition of United States. Solely
                                                      in a consecutive 12-month period that                   for purposes of this section, United                      (d) * * *
                                                      overlaps with a single plan year, or                    States means the 50 States, the District                  (4) An issuer with group policies that
                                                      across two consecutive plan years.                      of Columbia, and Puerto Rico.
                                                         (3) Individuals within a group of                                                                           provide coverage to employees,
                                                                                                                 (h) National of the United States. For              substantially all of whom are: Working
                                                      similarly situated individuals. (i) An                  purposes of this section, national of the
                                                      individual is described in this                                                                                outside their country of citizenship;
                                                                                                              United States, when referring to an                    working outside of their country of
                                                      paragraph (f)(3) only if:                               individual, has the meaning used in the
                                                         (A) The individual is a member of a                                                                         citizenship and outside the employer’s
                                                                                                              Immigration and Nationality Act (8                     country of domicile; or non-U.S.
                                                      group of similarly situated individuals
                                                                                                              U.S.C. 1101 et seq.) and includes U.S.                 citizens working in their home country,
                                                      that is formed for the purpose of
                                                                                                              citizens and non-citizen nationals.                    must aggregate and report the
                                                      traveling or relocating internationally in
                                                                                                              Thus, for example, an individual born                  experience from these policies on a
                                                      service of one or more of the purposes
                                                                                                              in American Samoa is a national of the                 national basis, separately for the large
                                                      listed in section 501(c)(3) or (4) of the
                                                                                                              United States at birth.                                group market and small group market,
                                                      Internal Revenue Code, or similarly
                                                                                                                 (i) Applicability date. The provisions              and separately from other policies,
                                                      situated organizations or groups. For
                                                                                                              of this section apply for plan years (in               except that coverage offered by an issuer
                                                      example, a group of students that is
                                                                                                              the individual market, policy years)                   with respect to an expatriate health plan
                                                      formed for purposes of traveling and
                                                                                                              beginning on or after January 1, 2017.                 (within the meaning of § 147.170(c) of
                                                      studying abroad for a 6-month period is
                                                      described in this paragraph (f)(3);                                                                            this subchapter) is not subject to the
                                                                                                              PART 148—REQUIREMENTS FOR THE                          reporting and rebate requirements of 45
                                                         (B) In the case of a group organized                 INDIVIDUAL HEALTH INSURANCE
                                                      to travel or relocate outside the United                                                                       CFR part 158.
                                                                                                              MARKET
                                                      States, the individual is expected to                                                                          *      *    *     *    *
                                                      travel or reside outside the United                     ■ 31. The authority citation for part 148              [FR Doc. 2016–13583 Filed 6–8–16; 11:15 am]
                                                      States for at least 180 days in a                       continues to read as follows:                          BILLING CODE 4830–01–P; 4510–29–P; 4120–01–P
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Document Created: 2018-02-08 07:35:46
Document Modified: 2018-02-08 07:35:46
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionProposed Rules
ActionProposed rule.
DatesComments are due on or before August 9, 2016.
ContactConcerning 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).
FR Citation81 FR 38020 
RIN Number1545-BN44, 1210-AB75 and 0938-AS93
CFR Citation26 CFR 1
26 CFR 301
26 CFR 46
26 CFR 54
26 CFR 57
29 CFR 2590
45 CFR 144
45 CFR 146
45 CFR 147
45 CFR 148
45 CFR 158
CFR AssociatedIncome Taxes; Procedure and Administration; Administrative Practice and Procedure; Penalties; Medical Loss Ratio; Reporting and Rebate Requirements; Excise Taxes; Health Care; Health Insurance; Pensions; Reporting and Recordkeeping Requirements; Pension and Excise Taxes; Health Insurance Providers Fee; Continuation Coverage; Disclosure; Employee Benefit Plans; Group Health Plans and Medical Child Support

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