SECTION 2. BACKGROUND

Section 9010 of the Patient Protection and Affordable Care Act (PPACA), Public Law 111–148 (124 Stat. 119 (2010)), as amended by § 10905 of PPACA, and as further amended by § 1406 of the Health Care and Education Reconciliation Act of 2010, Public Law 111–152 (124 Stat. 1029 (2010)) (collectively, the Affordable Care Act or ACA), imposes an annual fee on covered entities engaged in the business of providing health insurance for United States health risks. The fee is a fixed amount allocated among all covered entities in proportion to their relative market share as determined by each entity’s net premiums written for the data year, which is the year immediately preceding the year in which the fee is paid (the year in which the fee is paid is the fee year).

Section 9010(b)(3) requires the Secretary to calculate the amount of each covered entity’s annual fee. For this purpose, § 9010(g)(1) requires each covered entity to report to the Secretary its net premiums written for health insurance for any United States health risk for the data year. Section 9010(d) defines United States health risk to mean a health risk of any individual who is: (1) a United States citizen; (2) a resident of the United States

(within the meaning of § 7701(b)(1)(A)); or (3) located in the United States, during the period such individual is so located.

The Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) published final Health Insurance Provider Fee regulations (T.D. 9643, 78 FR 71476) on November 26, 2013, to provide guidance regarding the § 9010 fee. The regulations require each covered entity to annually report its net premiums written for health insurance of United States health risks by April 15th of the fee year on Form 8963, Report of Health In- surance Provider Information . For covered entities that file the Supplemental Health Care Exhibit (SHCE) with the National Association of Insurance Commissioners (NAIC), net premiums written for health insurance generally will equal the amount reported on the SHCE as direct premiums written minus medical loss ratio (MLR) rebates with respect to the data year, subject to any applicable exclusions under § 9010. ¹ Form 8963 accordingly requires reporting of direct premiums written for purposes of determining net premiums written. Section 57.4(b)(2) of the Health Insurance Providers Fee regulations provides that the entire amount reported as direct premiums written on the SHCE (including direct premiums written for expatriate health plans) will be considered to be for United States health risks unless the covered entity can demonstrate otherwise.

The Health Insurance Providers Fee regulations do not provide specific rules for expatriate health plans. The SHCE includes separate reporting for expatriate health plans, which are defined by reference to the definition of expatriate policies in the MLR final rule issued by the Department of Health and Human Services (MLR final rule definition). The MLR final rule definition 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 citi

zenship; (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. 45 CFR 158.120(d)(4). On March 29, 2014, Treasury and the IRS issued Notice 2014– 24, which provided a temporary safe harbor for a covered entity that reports expatriate health plans on its SHCE. Notice 2014–24 allowed a covered entity to exclude 50% of its direct premiums written for expatriate health plans reported on the SHCE in reporting total direct premiums written to the IRS for purposes of determining the fee for the 2014 and 2015 fee years. Certain covered entities applied this temporary safe harbor in reporting their direct premiums written for purposes of determining their 2014 fee, which was due on September 30, 2014.

On December 16, 2014, Congress enacted the Expatriate Health Coverage Clarification Act of 2014 (EHCCA) as part of the Consolidated and Further Continuing Appropriations Act, 2015, Division M, Public Law 113–235 (128 Stat. 2130 (2014)). Section 3(a) of the EHCCA provides that the ACA generally does not apply to expatriate health plans. Section 3(c)(1) of the EHCCA specifically excludes expatriate health plans from the § 9010 fee 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. These rules are generally effective for expatriate health plans issued or renewed on or after July 1, 2015, unless otherwise specified. Section 3(c)(2) of the EHCCA provides a special rule that applies solely for purposes of determining the fee under § 9010 for fee years 2014 and 2015. The special rule does not affect the calculation of the fee generally for all covered entities. Instead, after the fees are calculated, the special rule proportionally reduces the fee of a covered entity with expatriate health plans to account for its net premi

1References to the SHCE are solely for the covered entity’s convenience in identifying the premium information required for Form 8963. If the entity does not file an SHCE with NAIC, the entity is still required to file Form 8963 and provide direct premiums written for health insurance of United States health risks on Form 8963 and any other information required by the form. Other sources of information for determining direct premiums written include the MLR Annual Reporting Form filed with the Center for Consumer Information and Insurance Oversight or any equivalent form required by the state of domicile of the entity or by federal law. If no single form contains all of the relevant data for determining all of the direct premiums written for health insurance for United States health risks of an entity, then direct premiums written must be determined using aggregated data from multiple sources.

Bulletin No. 2015–15 873 April 13, 2015

reported $1 million in direct premiums written for expatriate health plans, in the aggregate, on their SHCEs for 2014. Pursuant to Notice 2014–24, X Group excluded 50% of this aggregate amount, or $500,000, from its 2014 Form 8963. In 2015, X Group members reported $2 million in direct premiums written for expatriate health plans, in the aggregate, on their SHCEs and X Group included that amount in direct premiums written on its 2015 Form 8963. Company X must attach the following statement to its 2015 Form 8963:

Company X hereby certifies that: (1) X Group filed SHCEs with the NAIC reporting direct premiums written for expatriate health plans in the 2014 and 2015 fee years; (2) X Group is filing this statement pursuant to Notice 2015–29; (3)(a) X Group reported an aggregate of $1,000,000 in direct premiums written for expatriate health plans on its 2014 SHCEs and (b) X Group excluded 50% of this aggregate amount, or $500,000, in determining the amount of direct premiums written reported on its 2014 Form 8963 pursuant to § 3.01 of Notice 2014–24; and (4) X Group is reporting an aggregate of $2,000,000 in direct premiums written for expatriate health plans on its 2015 SHCEs and has included that amount in direct premiums written on the attached 2015 Form 8963.