The ACA and International Assignees
The Affordable Care Act and its related implementation and reporting requirements make 2015 particularly challenging for employers with international assignees.
Employers are watching the Supreme Court case for its possible effects on employees and the employer penalties, but most are moving ahead with the reporting provisions, which are generally not directly affected by the provision being considered by the Supreme Court. This year may be particularly challenging for those with international assignees.
Some companies are still in the process of designing a health care plan that complies with the ACA; others are evaluating programs they already offer. Wherever your plan is along that continuum, large employers — with at least 50 full-time-equivalent employees as defined by the ACA — need to bear in mind the implications of international assignees and take steps to address compliance for their globally mobile employee base.
To start, note that the hours of service by employees performed within the United States determine whether an employer meets the 50 full-time-equivalent employee threshold.
A company that passes that threshold is a large employer that must offer the required health care coverage to actual full-time employees (those who work on average 30 or more hours a week, also within the United States) and their dependents in order to satisfy the law’s mandate.
The determination of a large employer must consider the employees of all the trades and businesses under common control — including foreign entities — under the U.S. controlled group rules of Internal Revenue Code section 414 (which apply to U.S. qualified plans and certain other benefits).
A foreign company with no U.S. entities or affiliates in its controlled group can still be considered a large employer based on the number of employees providing services within the United States.
Individual Mandate for International Assignees
The individual mandate under the ACA obliges individuals to obtain their own health insurance or incur their own penalties. Failure by an individual and members of the individual’s household to have health coverage — whether provided by an employer or obtained privately — may subject the individual taxpayer to penalties.
If any employer (large or not) pays for or reimburses employees for insurance purchased individually on a health exchange or from a private insurer, this coverage may satisfy the employee’s individual mandate requirement but may force the employer to pay a different IRS penalty.
Covering the employee’s cost for such coverage on a pre-tax basis may expose the employer to penalties of $100 per day per impacted employee.
Separate from this penalty, purchases of private coverage by employees on a health exchange or otherwise are not employer-sponsored coverage that satisfies the employer mandate.
Coverage That Satisfies the Employer Mandate
Eligible employer-sponsored coverage includes group health coverage under insured and self-insured employer plans typically offered by U.S. employers.
However, when an international assignee is covered under a non-U.S. plan, or a plan designated as an expatriate plan, only certain types of coverage qualify as minimum essential coverage (MEC) mandated by the ACA, including:
- Certain self-insured group health plans;
- Certain insured expatriate health plans (with plan years ending on or before Dec. 31, 2015); and
- Certain insured plans regulated by a foreign government.
Additionally, coverage offered for all full-time employees, including international assignees, must be minimum value and affordable to comply with the requirements of the employer mandate.
Failure to meet any of the above criteria may subject employers of international assignees to the employer shared responsibility penalty if any full-time employee obtains a credit or subsidy for coverage on a health care exchange.
Minimum value generally means the employer must pay at least 60 percent of the cost of the health coverage for the employee based on actuarial values — the equivalent of the “bronze” level of coverage available on health care exchanges.
To be affordable, the employee’s portion of the premium for single coverage generally must not cost more than 9.5 percent of the employee’s household income.
Because an employer cannot determine an employee’s household income, the regulations offer three methods to determine whether the cost is affordable for an employee.
Generally, the three safe harbors provide that the employee’s portion of the premium for single coverage cannot cost more than 9.5 percent (an indexed percentage) of:
- The employee’s Form W-2, box 1 wages;
- The Federal Poverty Limit based on the annual poverty rate for a family size of one; and
- 130 hours multiplied by the employee’s rate of pay at the beginning of the year.
Whichever method an employer chooses to use must be applied uniformly and consistently among a reasonable category of employees.
Understanding the Reporting Process
Effective Jan. 1, the IRS added new reporting responsibilities under the ACA and requires employers to submit new forms in early 2016. Company IT systems need to be in place to capture this information as required.
Draft versions of Form 1095-C, and the 1094-C Transmittal Form require large employers to demonstrate that the health care coverage they offer is MEC that meets the minimum value and affordability requirements.
This reporting is required of large employers, regardless of whether they offer health coverage or not, and is different than the requirement to report health care costs on employees’ Forms W-2 (which has been required since 2012).
The new forms require details of health coverage offered to each employee, including months of coverage offered, cost of coverage, whether coverage meets minimum-value rules and “affordability rules,” and whether the coverage was offered to almost all full-time employees and their dependents.
In addition, if any employer (large or not) self-insures health coverage, separate information is required on a separate part of Form 1095-C for large employers, and on Form 1095-B and the 1094-B Transmittal Form for non-large employers.
This information must include not just the employee, but all family members who are covered under the plan.
Foreign insurers and employers are also accountable for these reporting requirements; this may mean an employer identification number is required for a foreign entity (including those within a large employer’s controlled group).
Communication is Key
Organizations need to ensure that the lines of communications are open between HR, finance and IT, among other departments, to ensure that the right information is available to meet reporting requirements.
Employers should consider communicating with international assignees their obligations under the ACA, particularly if there are concerns that their foreign coverage does not meet the individual mandate and may subject the assignee to the individual penalty.
Employers may also want to consider whether the individual penalty should be part of their tax equalization policy.
Even if the foreign coverage is MEC for purposes of the individual requirement, employers need to consider whether it meets the employer shared responsibility requirements.
When evaluating or designing health care plans, organizations need to assess what systems are already in place that can be utilized for reporting purposes. Chances are large organizations are already collecting the information needed by the IRS.
As with other business challenges, globalization adds more pressure when it comes to efficient and accurate reporting.
This may mean communicating with foreign employers offering the coverage to the assignee, or foreign insurance companies if the plan is an insured plan.
Although these forms are not due until Jan. 31, 2016, they rely on data collected and compiled starting Jan. 1, 2015. If the information is not reported accurately or retained properly, even if the plan is compliant, the time spent resolving those gaps can translate into wasted resources and added expenses.
Greenberg on Cuba
On a visit to Moscow in 1964, Hank Greenberg noticed a picture of a Havana office building on the desk of an official with the Soviet insurance company Ingosstrakh.
“That looks like the building where my company housed its insurance operations,” Greenberg — who was in Moscow seeking a travel risk reinsurance deal — told the official.
The C.V. Starr Companies had an office in Havana – pictured above – between 1943 and 1958.
“That may be,” the Soviet official replied. “Now it is the building where Ingosstrakh houses the Soviet Union’s Cuban operations,” he added.
“Please take care of that building,” Greenberg told the official. “We will get it back … soon.”
More than 50 years after Greenberg made that bold statement, as recounted in his 2013 book “The AIG Story,” the day that Starr Companies takes possession of its former property in Havana is not yet here.
“Change must come about, but how fast? I can’t answer that.” – Hank Greenberg, CEO and Chairman of the Starr Companies.
With the recent easing of travel restrictions to Cuba by the U.S. government, however, Starr Companies’ executives are checking on the condition and ownership of the building just the same.
Untangling the history of that Havana building is just one of the opportunities that are on the minds of business people in the United States since travel restrictions to Cuba were eased in January.
Greenberg expresses the hope that his company can one day re-open an insurance operation in Havana. At the same time, Greenberg said that there is much work yet to be done, on the part of both the public and the private sector, before anything like that can happen.
“Both governments have got to agree on the speed by which normalization would come into being,” Greenberg said.
Since the restrictions were eased, Greenberg reports that the Starr Companies’ travel services subsidiary Assist-Card International Holdings, which it acquired in 2011, is already seeing an uptick in inquiries from businesspeople interested in its travel protection services in Cuba.
“From what we can discern, there is a great deal of interest and a pent-up need to travel,” Greenberg said.
The hotel and restaurant business, agriculture and travel-related industries like cruise shipping and aviation are just a few of the industries that will see opportunities in nearby Cuba as relationships between that country and the United States open up.
There will also be an intense interest, Greenberg said, for people of Cuban descent who are United States citizens eager to visit their origin country.
However, more evolution in government relations must occur before many of those dreams can become a reality.
“Change must come about, but how fast? I can’t answer that,” Greenberg said.
One thing Greenberg is certain of. Free trade is the quickest route to building lasting bonds between the United States and Cuba.
“I think that where trade increases between countries generally you see change in attitudes and building better trust between countries. You learn from each other, it’s a faster way to normalize relations than anything I can think of,” Greenberg said.
Greenberg stressed that Assist-Card International isn’t the only U.S.-based insurance company or subsidiary in the travel risk business.
The Starr chairman indicated though that he expects his company to be a strong competitor.
“The challenges of doing business in Cuba are substantial,” Greenberg said.
“But Starr is well-positioned and prepared to leverage our relationships and global network to support our clients’ entry into this market.”
Healthcare: The Hardest Job in Risk Management
Radically changing cost and reimbursement models.
Rapidly evolving service delivery approaches.
It is difficult to imagine an industry more complex and uncertain than healthcare. Providers are being forced to lower costs and improve efficiencies on a scale that is almost beyond imagination. At the same time, quality of care must remain high.
After all, this is more than just a business.
The pressure on risk managers, brokers and CFOs is intense. If navigating these challenges wasn’t stress inducing enough, these professionals also need to ensure continued profitability.
“Healthcare companies don’t hide the fact that they’re looking to reduce costs and improve efficiencies in practically every facet of their business. Insurance purchasing and financing are high on that list,” said Leo Carroll, who heads the healthcare professional liability underwriting unit for Berkshire Hathaway Specialty Insurance.
But it’s about a lot more than just price. The complexity of the healthcare system and unique footprint of each provider requires customized solutions that can reduce risk, minimize losses and improve efficiencies.
“Each provider is faced with a different set of challenges. Therefore, our approach is to carefully listen to the needs of each client and respond with a creative proposal that often requires great flexibility on the part of our team,” explained Carroll.
Creativity? Flexibility? Those are not terms often used to describe an insurance carrier. But BHSI Healthcare is a new type of insurer.
The Foundation: Financial Strength
Berkshire Hathaway is synonymous with financial strength. Leveraging the company’s well-capitalized balance sheet provides BHSI with unmatched capabilities to take on substantial risks in a sustainable way.
For one, BHSI is the highest rated paper available to healthcare providers. Given the severity of risks faced by the industry, this is a very important attribute.
But BHSI operationalizes its balance sheet in many ways beyond just strong financial ratings.
For example, BHSI has never relied on reinsurance. Without the need to manage those relationships, BHSI is able to eliminate a significant amount of overhead. The result is an industry leading expense ratio and the ability to pass on savings to clients.
“The impact of operationalizing our balance sheet is remarkable. We don’t impose our business needs on our clients. Our financial strength provides us the freedom to genuinely listen to our clients and propose unique, creative solutions,” Carroll said.
Keeping Things Simple
Healthcare professional liability policy language is often bloated and difficult to decipher. Insurers are attempting to tackle complex, evolving issues and account for a broad range of scenarios and contingencies. The result often confuses and contradicts.
Carroll said BHSI strives to be as simple and straightforward as possible with policy language across all lines of business. It comes down to making it easy and transparent to do business with BHSI.
“Our goal is to be as straightforward as we can and at the same time provide coverage that’s meaningful and addresses the exposures our customers need addressed,” Carroll said.
Claims: More Than an After Thought
Complex litigation is an unfortunate fact of life for large healthcare customers. Carroll, who began his insurance career in medical claims management, understands how important complex claims management is to the BHSI value proposition.
In fact, “claims management is so critical to customers, that BHSI Claims contributes to all aspects of its operations – from product development through risk analysis, servicing and claims resolution,” said Robert Romeo, head of Healthcare and Casualty Claims.
And as part of the focus on building long-term relationships, BHSI has made it a priority to introduce customers to the claims team as early as possible and before a claim is made on a policy.
“Being so closely aligned automatically delivers efficiency and simplicity in the way we work,” explained Carroll. “We have a common understanding of our forms, endorsements and coverage, so there is less opportunity for disagreement or misunderstanding between what our underwriters wrote and how our claims professionals interpret it.”
Responding To Ebola: Creativity + Flexibility
The recent Ebola outbreak provided a prime example of BHSI Healthcare’s customer-centric approach in action.
Almost immediately, many healthcare systems recognized the need to improve their infectious disease management protocols. The urgency intensified after several nurses who treated Ebola patients were themselves infected.
BHSI Healthcare was uniquely positioned to rapidly respond. Carroll and his team approached several of their clients who were widely recognized as the leading infectious disease management institutions. With the help of these institutions, BHSI was able to compile tools, checklists, libraries and other materials.
These best practices were immediately made available to all BHSI Healthcare clients who leveraged the information to improve their operations.
At the same time, healthcare providers were at risk of multiple exposures associated with the evolving Ebola situation. Carroll and his Healthcare team worked with clients from a professional liability and general liability perspective. Concurrently, other BHSI groups worked with the same clients on offerings for business interruption, disinfection and cleaning costs.
Ever vigilant, the BHSI chief underwriting officer, David Fields, created a point of central command to monitor the situation, field client requests and execute the company’s response. The results were highly customized packages designed specifically for several clients. On some programs, net limits exceeded $100 million and covered many exposures underwritten by multiple BHSI groups.
“At the height of the outbreak, there was a lot of fear and panic in the healthcare industry. Our team responded not by pulling back but by leaning in. We demonstrated that we are risk seekers and as an organization we can deploy our substantial resources in times of crisis. The results were creative solutions and very substantial coverage options for our clients,” said Carroll.
It turns out that creativity and flexibly requires both significant financial resources and passionate professionals. That is why no other insurer can match Berkshire Hathaway Specialty Insurance.
To learn more about BHSI Healthcare, please visit www.bhspecialty.com.
Berkshire Hathaway Specialty Insurance (www.bhspecialty.com) provides commercial property, casualty, healthcare professional liability, executive and professional lines, surety, travel, programs, and homeowners insurance. It underwrites on the paper of Berkshire Hathaway’s National Indemnity group of insurance companies, which hold financial strength ratings of A++ from AM Best and AA+ from Standard & Poor’s. Based in Boston, Berkshire Hathaway Specialty Insurance has regional underwriting offices in Atlanta, Boston, Chicago, Los Angeles, New York, San Francisco, Toronto, Hong Kong, Singapore and New Zealand. For more information, contact email@example.com.
The information contained herein is for general informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any product or service. Any description set forth herein does not include all policy terms, conditions and exclusions. Please refer to the actual policy for complete details of coverage and exclusions.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Berkshire Hathaway Specialty Insurance. The editorial staff of Risk & Insurance had no role in its preparation.