Cigna: IRS Rule Could Force Health Coverage Plans Overseas

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Oct. 19 — An IRS rule that could limit health plan coverage for expatriates working in the U.S. to one year would put domestic insurers at a disadvantage to foreign competitors, Cigna Corp. said in a letter to the agency.

Multinationals and foreign governments prefer to make large purchasing decisions on a multiyear basis and would be more likely, if the rules were to be implemented, to buy from overseas plan providers that are able to offer coverage for “unlimited” periods of time, Cigna said.

“This would leave US insurers of expatriate health plans with no choice but to move their plans offshore as well, resulting in the loss of US jobs and US revenue,” the letter said.

Cigna said the rules the Internal Revenue Service outlined in Notice 2015-43, issued in June, don't reflect the reality of many expatriates who may stay in the U.S. for several years to work or study. The agency has said it plans to issue more rules about how expatriate health plans interact with the fees and tax treatment under the Affordable Care Act, which isn't intended to apply outside the country or to non-U.S. residents (126 DTR G-3, 7/1/15).

Merger Mania

Guidance from the IRS would come at the time when U.S. health insurers are facing less competition at home, as the industry consolidates from five major companies to three. Anthem Inc. agreed to acquire Cigna for about $48 billion in July. The transaction is expected to be completed by the end of 2016. Aetna Inc. and Humana Inc. also struck a $35 billion deal this summer.

The IRS has been sorting out some of the ambiguity surrounding the details about which individuals are considered expatriates. Anticipated guidance will apply to group plans covering employees working outside their country of citizenship or employer's domicile and non-U.S. employees working in their home country.

If the IRS eliminated the option for providers to maintain coverage after 12 months, expatriates would either have to purchase a plan or remain uninsured. This would be detrimental to U.S. revenue, because some expatriates might qualify for taxpayer-subsidized plans on the exchanges, Cigna said. Foreign government plan sponsors aren't subject to the applicable large employer rules and most in-bound expatriates aren't subject to the individual shared responsibility payment requirement.

Fighting the Fee

Cigna also said that subjecting any in-bound or out-bound expatriate to the Patient-Centered Outcomes Research Institute fee, which funds research about more cost-effective health care, is contrary to the language in the Expatriate Health Coverage Clarification Act of 2014.

The PCORI fee, which was $2.08 per covered individual during 2015, also makes it harder for U.S.-based insurers to compete with foreign competitors, Cigna said. The IRS has reduced the PCORI fee that expatriate plans must pay for 2014 and 2015 (61 DTR G-4, 3/31/15).

To contact the reporter on this story: Laura Davison in Washington at
To contact the editor responsible for this story: Brett Ferguson at

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