The National Immigration Law Center has said that the Expatriate Health Coverage Clarification Act of 2014 (H. R. 4414 as amended or “EHCCA”), which passed the House last week, is “like using a bat to swat a fly.” I agree that this analogy fits. The EHCCA professes to fix a problem with health coverage for a relatively small group of American workers who work oversees. But, instead it creates significant loopholes that allow employers and health plans to skirt around fees and provide second-class coverage to a much larger group of people. I walk through the three main problems with the EHCCA below:
1. The EHCCA creates loopholes that allow employers and health plans to skirt around fees and provide second-class coverage.
The EHCCA exempts expatriate employers and health issuers and plans from many of the Affordable Care Act’s requirements:
- Expatriate health plans would be exempted from fees required under the ACA’s Section 9010. Under the ACA, starting January 1, 2014, health insurance issuers with net insurance premium of more than $25 million dollars must pay an annual fee to the IRS. Under the EHCCA, premiums for expatriate health plans would not be counted toward a health insurance issuers’ premium revenue when determining this fee. So health plans would not have to pay fees for these types of health plans (EHCCA Sec 2 (c)).
- Large employers would not be required to offer coverage or pay a penalty for expatriate health plans. The ACA includes a free rider policy requiring large employers to pay a penalty if their workers enroll in subsidized coverage in the marketplace. Under the EHCCA, this penalty does not apply to employers operating as plan sponsors for expatriate health plans. The EHCCA says that many parts of the ACA—including the employer responsibility requirement—do not apply to expatriate health plans, employers, and issuers of expatriate plans (EHCCA Sec 2 (a)).
- Expatriate health plans would not have to include many of the ACA’s key consumer protections. Under the EHCCA, many of the ACA’s insurance reforms would not apply to expatriate health plans, expatriate health insurance issuers, or employers acting as plan sponsors. Expatriate health plans could include lifetime and annual limits, would not have to provide preventive services, and these plans would not have limits on their administrative costs under the medical loss ratio requirements. (EHCCA Sec 2(a)).
2. A much broader group of people than Americans working oversees could be put into expatriate health plans.
While the EHCCA professes to apply to a small group of employers and health plans that cover U.S. citizens working abroad, its language is written in a way that it applies to all lawful permanent residents and nonimmigrant visa holders working in the US. The EHCCA’s definition of “qualified expatriate,” includes “lawful permanent residents, or nonimmigrants for whom there is a good faith expectation by the plan sponsor of the plan that, in conjunction with the individual’s employment, the individual is abroad for a total of not less than 180 days during any period of 12 consecutive months.” EHCCA Sec 2(d)(3)(A). For people who are not citizens of the U.S., the definition of “abroad” means “outside of the country of which that individual is a citizen.” EHCCA Sec 2 (d)(5)(B). So, employers could put immigrants who are lawful permanent residents living and working in the United States all year long—and who do not even travel oversees at all—into expatriate health coverage that does not meet ACA requirements. The overly broad definition of “expatriate” would also include all nonimmigrant visa holders, including those who are on a path to legal permanent residency and citizenship, and who may never set foot outside of the US, including survivors of trafficking or other serious crimes.
3. Under the House-passed EHCCA it is unclear whether workers offered expatriate plans can “jump the firewall” and get premium tax credits in the marketplace.
The ACA includes a “firewall” that prevents a worker with an offer of employer coverage from purchasing coverage in the marketplace and getting premium tax credits unless the employer offers minimum essential coverage that is unaffordable or inadequate. The House-passed EHCCA is unclear about whether workers offered employer coverage in an expatriate plan have special permission to “jump the firewall” and access premium subsidies in the marketplace (EHCCA (d)(4)(C). If the EHCCA is amended to clarify that these workers could jump the firewall, workers would have three choices: 1) take up the offer of second-class coverage and pay a premium that might be unaffordable but not face the individual mandate penalty; 2) buy into the marketplace; or 3) go uninsured and potentially face an individual penalty.
Whether the worker enrolls in the marketplace or goes uninsured (scenarios 2 or 3 above), the employer will not have to pay a penalty. The employer then has no incentive to encourage scenario 1 by making the offer of coverage attractive and affordable. Employers looking for the least expensive option could offer expatriate plans that are not only second-class in terms of benefits, but that also have unaffordable premiums for workers.
Not allowing workers to jump the firewall could lead to more underinsured (scenario 1) or uninsured workers (scenario 3). The alternative, allowing workers to jump the firewall and enroll in the marketplace with premium subsidies, could lead to more insured workers, but also contribute to “crowd-out” of employer coverage by the marketplace.
While there may be a legitimate need to find ways to make it easier for employers to cover workers that spend time away from their home country, the House-passed H.R. 4414 is not the right solution. It creates loopholes that at the end of the day leave employers that hire lawful permanent residents and nonimmigrants who work in the United States with little incentive to offer meaningful coverage for their workers. It is, indeed, like using a bat to swat a fly.
Thanks to my colleague, JoAnnVolk, at Georgetown University’s Center for Health Insurance Reforms, for her help with this analysis.