Health Coverage Questions for Expats Abound

By Steve Bates May 20, 2014

The U.S. Patient Protection and Affordable Care Act (PPACA) has made it more difficult for HR professionals to provide adequate health insurance for expatriate workers heading abroad for less than one year.

“The expatriate benefits space has always been somewhat complex—for employers and to some extent for employees,” said Sheldon Kenton, senior vice president of global employer sales for insurer Cigna in Wilmington, Del. The health reform law “has made a relatively complex space more complex.”

Employees of U.S.-based companies who work abroad for at least one year generally have company-provided coverage through an international health plan such as those sold by Cigna and several other insurers. Most of these expats are exempt from the PPACA.

But expats on shorter assignments—a fast-growing segment of employees—are covered by the reform law, which will impose penalties on expats and their employers if they fail to meet certain coverage mandates. The law has increased employers’ administrative burdens, has narrowed their coverage options and has increased their coverage costs for short-term expats, said Kenton.

Still, employers and expats have health plan choices. “There are really good options,” said Skip Woody, a partner in health benefits consulting firm Hill, Chesson & Woody in Durham, N.C. “There are dozens of plan designs.”

Experts say that about 1 percent of the U.S. workforce is posted abroad. “Expatriates as a group were not typically on the radar” in Washington when the health reform law was drafted and debated, said Amy Bergner, a managing director in consulting firm PricewaterhouseCoopers (PwC) ’s HR services health care practice in the Washington, D.C. area. Consequently, there is substantial confusion about how the law does—and should—apply to expats. In particular, “There’s a lot of consternation about which individuals can be exempt [from the PPACA] and how the individual mandate might be satisfied by coverage,” she said.

Some insurance industry officials support legislation (H.R. 4414) that passed the House of Representatives on April 29, 2014. It would exempt from the PPACA most expats and foreign employees on temporary assignment in the U.S. The bill faces an uncertain future in the Senate. The Obama administration opposes it, saying that it would reduce consumer protections and create more tax code loopholes.

Cigna and other U.S.-based insurers say that the PPACA puts them at a competitive disadvantage with foreign-based insurers. Cigna says that if the House bill does not become law, it might move some of its operations—and jobs—overseas so that it can sell international expat health plans that are not subject to the PPACA.

Expats faced health coverage challenges well before the reform law was enacted in 2010. Many countries have their own laws and regulations affecting U.S-based employees who work within their borders. For example, Switzerland is divided into 26 cantons, each with its own minimum health coverage rules.

“Each region [of the world] is totally different, and it’s incredibly important for a company to not only be compliant but to do its best to prepare their expat as much as possible,” said Jim Peiffer, senior vice president, global employee benefits, for New York-based insurer MetLife.

But uncertainty is adding to the PPACA’s impact. “We’re still in a state of flux,” said Ed Hannibal, global leader of consulting firm Mercer’s mobility services, who is based in Chicago. He said the PPACA—and reactions to it by host countries—are forcing changes to expat health plans sold in the U.S. “It can be challenging to comply,” in part because of “piecemeal guidelines” from the U.S. government.

Insurance industry experts say they expect the Obama administration to issue additional guidance on some gray areas regarding expats and the PPACA. Already, the government has declared that health plans for expats will remain exempt from compliance with certain reform requirements until the end of 2016.

Some U.S.-based employers are purchasing U.S. and host-country health plans for expats to ensure that they can access first-rate care and comply with the laws and regulations in both countries, an expensive and wasteful practice.

Some employers purchase only a health plan in the destination country, but these plans might not satisfy PPACA requirements unless the carrier agrees to satisfy U.S. tax reporting obligations, noted Pam Enright, senior vice president and director of insurance broker Lockton’s global benefits practice in Kansas City, Mo.

When in doubt about how much coverage to provide, “Be generously over-compliant on the front end,” suggested Amy Gordon, a partner in the law firm of McDermott Will & Emery in Chicago.

Other pitfalls abound. If an employee is sent overseas on what is expected to be a PPACA-exempt assignment of more than one year but returns earlier, he or she might face a penalty. And health plans designed for short-term expats generally do not provide good coverage for their dependents remaining in the U.S.

Large multinational employers that send employees abroad frequently tend to have more staff and more experience with providing expat coverage than do other U.S.-based companies. However, “The PPACA has affected everybody,” said Kenton. “Some of the smaller clients probably have been more badly affected.”

Industry experts suggest that HR professionals at small and midsize firms:

  • Talk to their consultants, their tax firm, their insurance broker and their legal counsel.
  • Put together a checklist of key topics that need to be addressed.
  • Practice due diligence, especially when sending an employee to a country where the company has not previously sent expats.
  • Stay on top of legal and regulatory developments in the U.S. and in destination countries.

Expats themselves need to be aware of how laws and regulations impact their health care. “Because this is all so new, don’t assume that this is all taken care of” by your employer, said Gordon, to employees headed abroad. “Do your homework. Make sure that you’re covered.”

“We do see people going overseas with no coverage,” said David McKeegan, co-founder of Greenback Tax Services, a virtual global tax preparation service.

Ultimately, employers know how important health insurance is to their employees, and therefore companies “will do what they have to do” to make sure that their expats have adequate coverage, said Eileen Mullaney, a principal at PwC in the New York City area.

Steve Bates is a freelance writer based in the Washington, D.C., area and a former writer and editor for SHRM.

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