We get various versions of the question all the time, from clients, schools, students and on the list-servs – how does PPACA apply to international students? The question is a good one, especially considering the levels of uncertainty and confusion surrounding the massive new law. PPACA, or the Patient Protection and Affordable Care Act, was signed into law on March 23, 2010 by President Obama. Implementation was slowed by court challenge and state resistance, which came to a head on June 28, 2012 when the Supreme Court upheld the constitutionality of most of PPACA. With the decision followed by the re-election of President Obama, most state resistance turned to grudging acceptance.
Legislators were not thinking about international students when creating and negotiating this incredibly complex set of changes to US law. In addition, the majority of healthcare insurance in the US is delivered via an employee group plan, and PPACA was designed largely with this delivery model in mind. Therefore international students are far down the list of target groups for legislators and regulators to address and provide clarity. Nevertheless, more than three years down the line, we have many clear answers, with a few important questions still unanswered.
On March 16, 2012, the Department of Health and Human Services issued a final ruling on student health insurance coverage, providing some relief from overall PPACA requirements for group student health insurance plans. The definition included in the regulations makes clear that the regs address only group health plans – those subject to a written agreement between a school and the insurer. The regulations do not apply to individual plans. The revised requirements for school group plans went into effect last year and include the following:
- Annual Limits
- Policy year beginning July 1, 2012 – September 23, 2012: Annual limits of no less than $100,000
- Policy year beginning September 24, 2012 until December 31, 2013: Annual limits of no less than $500,000
- Policy year beginning on or after January 1, 2014: No annual limits
- Preventative Care: required to provide preventative care without cost-sharing (i.e. no deductible or co-pay)
- Lifetime limits: Plan may not impose lifetime limits
- Pre-existing condition limitations: Plans may not impose pre-existing condition limitation on those younger than age 19; after January 1, 2014, pre-existing conditions cannot be excluded for anyone (regardless of age)
Insurers and brokers vary greatly in their response to these new school group insurance requirements. We talk regularly with many insurers in the market, and each has a well thought out plan and a solid legal basis for their approach, as confirmed by their attorneys and in some cases by HHS directly. We have taken the most conservative route – all of our school group clients are now on fully PPACA compliant plans, in accordance with the March 2012 regulations. Some insurers have created less expensive group plans relying on the Short Term Limited Duration exemption discussed below. Although there was language in the March 2012 regs discouraging the use of Short Term Limited Duration plans in the group context, their use was not outright forbidden when appropriate and several reputable insurers have used the structure.
As noted above, the HHS regulations from March, 2012 do not address individual plans. PPACA requirements add a lot of cost for an insurer, which can be only partially offset through higher deductibles. Taken together, this means a PPACA-compliant individual plan would be very expensive, provide too much coverage in some areas, and not enough in other areas, for most international students buying their own plan. Therefore most individual international student insurance plans available today rely on a total exemption from PPACA by being classified as “Short Term Limited Duration” plans. Short term limited duration plans cannot exceed 364 days in initial term, and must not be automatically renewable by the student. Some STLD plans cannot be renewed at all and the insured must buy a new plan after it expires; and some can be renewed as long as the student re-confirms their eligibility to the insurance carrier.
Analysis of our own data showed that less than 5% of students purchasing an individual insurance plan actually keep the plan for longer than 12 months, meaning that the plan truly is a STLD plan. By relying on the STLD exemption from PPACA, insurers can structure plans directly suited to the needs of international students who largely need short-term coverage, but who are able to keep their plan longer if they need, as long as they continue to remain eligible. In most cases, eligibility requires continuing student status outside of the student’s home country.
Open Questions – Individual Mandate and State Exchanges
So we know the requirements for international student school group insurance, as set out in the March 2012 regulations, and we know that most individual plans are currently structured as STLD plans and therefore exempt from PPACA. The main questions remaining center around what obligation the international student may have to prove that he or she has “minimum essential coverage.” This requirement, commonly called the “individual mandate”, is central to PPACA; by requiring everyone to have health insurance, millions more people get into the system, spreading the costs for insurers of additional benefits and less exclusions across a greater number of people. The individual mandate has not yet kicked in – it is scheduled to begin on January 1, 2014, although there is currently some pressure to push that date back, as many pieces of the puzzle are not yet ready.
Clearly there are some categories of international students for whom the individual mandate will not apply – for instance those that are not present in the US beyond a certain amount of time. There was guidance from HHS early on in the process that perhaps the mandate would apply to any resident non-citizen who will be in the US longer than the minimum duration of coverage available through that state’s exchange. Since the exchanges are not ready, and in many cases not close to ready, it is hard to get any clear guidance on what may be the minimum duration stay that would subject a student to the individual mandate. State exchanges will begin to come online on October 1 of this year.
Further complicating the application of the mandate to international students is the method of enforcement. If the mandate goes into effect as planned on January 1, 2014, US citizens will report on their tax return filed April 15, 2015 whether or not they had “minimum essential coverage” and if not, potentially have to pay the statutory penalty (which is $95 in year one, going up after that). There are exemptions for uninsured durations of less than three months, and other exemptions and waivers that could potentially apply to international students.
Like PPACA in general, the individual mandate was conceived and created with US residents in the US in mind – everything else is ancillary, and 700,000+ international students do not move the legislative needle. How the individual mandate will apply to international students, how that obligation can be fulfilled and how it will be enforced still remain to be seen. We look forward to getting a clearer picture over the coming months and years, and we will share whatever our research turns up.