International Students and the Affordable Care Act
The Affordable Care Act (ACA) has had a huge impact on the insurance world in the USA, and there are many parts to the ACA that international student advisors should be aware of how this all impacts international students. The short answer is that international students will be exempt from the ACA for up to 5 years (shorter depending on their visa type).
We have outlined the full explanation of this in the following two topics:
- International Students and the Individual Mandate under PPACA
- The Affordable Care Act and J1 Participants in Non-Student Categories
We have also posted a guide for international students, that explains to them how the ACA will and could affect them:
You can also watch the following webinar that we hosted for international educators about the Affordable Care Act:
International Students and the Affordable Care Act WebinarOriginally presented: Friday 12/13 2 p.m.
1. Title Slide: International Students and the Affordable Care Act
Hello everyone, and welcome. We are very happy to have you all with us for this webinar, called “International Students and the Affordable Care Act.” My name is Keith Clausen, and I’m the President of Envisage International Corporation, which owns International Student Insurance. Here with me is Annemarie Estrada, our director of client services, who many of you know by her maiden name Annemarie Keller. Annemarie is fresh back from ICEF in Miami, where she has talked herself out. So I will be handling the presentation while Annemarie compiles and organizes any questions that come in. And on that note, please send us any questions through your webex portal, and we will get to as many as we can at the end. You see the little live chat type box there. Please send any questions as you think of them – this will give us time to compile them so that we can show them on the screen at the end, as we answer them.
This webinar is designed to cover all of the main points of the Affordable Care Act as it relates to International Students. It’s designed specifically for you - advisors that deal with international students and their insurance from an everyday or strategic perspective - and to cover the most important points regarding the ACA.
- Four Key Terms
- Background on the Affordable Care Act (ACA)
- International Students Exempt from Individual Mandate
- Student Coverage Options, Post-ACA
- State Healthcare Exchanges
And here is the agenda. First, we’ll cover a little terminology, three key terms. Then a little background on the ACA to give you the context. Next, we will talk about how international students are exempt from the individual mandate. Then, we will discuss the options that colleges and universities have for coverage in a post-ACA world. Finally, we’ll talk about the state healthcare exchange, briefly summarize, and move on to any questions.
We will not be talking about study abroad students, expatriates, immigrants and undocumented students today. Or J1s in non-student categories, like au pairs or interns. We only have 30 minutes and each of those topics would require its own webinar. We do have thoughts on all of those situations though so please feel free to email us any particular questions.
3. Four Key Terms
- ACA, PPACA, Obamacare: Patient Protection and Affordable Care Act
- Individual Mandate, or Individual Shared Responsibility Provision
- Minimum essential coverage
- Short-Term Limited Duration exemption
There’s a lot of jargon associated with this new law, starting with the name. I’m sure a lot of you have heard the man in the street story about the poll that asks a guy what does he think of Obamacare. And the guy says, I hate Obamacare. It’s ruining our country. Then they ask, what do you think of the Affordable Care Act? Oh I love the affordable care act. I’ll finally have coverage. Well the law is actually called the Patient Protection and Affordable Care Act, but its now mainly shortened to the Affordable Care Act. Sometimes you’ll hear PPACA, and obviously Obamacare – but it all refers to the same thing. Today we will call it the Affordable Care Act or ACA.
Individual Mandate, or Individual Shared Responsibility Provision This refers to the part of the ACA that requires every American to have qualifying health insurance coverage. If you don’t have qualifying coverage, starting January 1 2014, then you have to pay a fine on your tax return, call the individual shared responsibility payment. This is the part of the law that was challenged as unconstitutional – how can we force someone to buy a product? The ACA survived that challenge, back in June of 2012, when the Supreme Court ruled that the mandate was constitutional, because we are not forcing someone to buy a policy, we are simply fining them if they don’t.
Minimum essential coverage. This term refers to a set of benefits that an insurance policy needs to have to meet the ACA. Many plans, like employer group plans and government plans, are deemed to meet the minimum essential coverage requirements.
Short-term limited duration refers to the primary exemption from the ACA. Using this exemption, insurers can continue to custom-build policies that do not include minimum essential coverage for certain populations – like international students. The initial term of the coverage must be for 364 days or less. And the coverage must not be able to be automatically extended by the participant without further action by the carrier. It doesn’t mean you can’t keep the coverage longer than 364 days – most carriers require the participant to re-affirm their continued eligibility, and that is enough to keep the coverage as STLD.
With those four key terms out of the way, now we’ll turn to some background information.
4. Background Information (the Year of the ACA)
ACA goes into full effect January 1, 2014 For us, this has been the year of the Affordable Care Act. Although it was passed almost 4 years ago, much of this massive act stayed in the shadows until this year, as a lot of its most stringent provisions don’t go into effect until January 1, 2014.
- International students not high on the agenda
- Primarily concerned with Americans in America
- 50 million uninsured, massive expansion of Medicaid
- 40 million immigrants
Our main concern, and your main concern, is how will the ACA impact international students. But that is not the main concern of the policymakers behind the act. The ACA was conceived and implemented primarily with 350 million Americans in mind, including the more than 50 million uninsured. It was built around the assumption of the employer delivery model, which is how most americans get their healthcare. And even when coverage for non-US citizens has been discussed and addressed, much of the discussion has focused on the over 40 million immigrants in the US. So it’s understandable that no one was thinking about 819,000 international students. Therefore it’s taken until now to tease out the specific information we all need to act with confidence and authority as we advise international students around the country.
End result – certainty on the big questions
Here at ISI, we are well-positioned to dig deep on the ACA as we work with and have good access to over a dozen major insurance companies, including Lloyds of London, Blue Cross/ Blue Shield, Geo-Blue, Aetna and others. Each of these has their own in-house lawyers, their own external lawyers, and hordes of lobbyists and consultants working on this. And I am a lawyer by training, practicing for a decade before I got into international education. So we are a fairly well-positioned agency to wade through all the noise and pull out the facts. The good news is, although there are some small areas of uncertainty still in front of us, the big questions as to international students and the ACA have been answered, and that’s what we’ll hit today. Starting with the most critical one – the individual mandate.
5. International Students Exempt from Individual Mandate
- IRS analysis based on resident vs. non-resident alien status
- a. Existing law and analysis, many examples
- b. Visitors, like students, are "non-resident aliens" by default
Okay, the title of this slide says it all. Because the mandate is so critical, we will start there. The individual mandate requires everyone subject to the ACA to have “minimum essential coverage”. If you don’t have it, you have to pay the fine. It’s easy for US citizens and permanent residents – they all need it. But for non-immigrant visitors, like students, we didn’t know how the individual mandate would apply. How long would someone need to be in the US before they became subject to the mandate? It was up to the IRS to clarify this point for us. And the IRS, believe it or not, has done something good. They have relied on an existing analysis to determine whether the mandate applies to a non US citizen living in the US. That existing analysis is resident vs. non-resident alien. It’s very simple – if you are classified for tax purposes as a “resident alien”, then the ACA and the individual mandate applies to you, and you need to have “minimum essential coverage”. If you are classified as a “non-resident alien”, then you are exempt from the ACA, whether or not you have to file a tax return.
International students on F, M, Q and J visas are exempt as non-resident aliens for 5 years. After 5 years, the substantial presence test begins.
International students on F, J, M or Q visas are automatically classified as non-resident aliens for their first 5 calendar years in the US – which means that they are automatically exempt from the ACA for their first 5 calendar years in the US. After five years, the clock starts ticking on the substantial presence test. There are additional exemptions available, which we won’t get into now. Legally required insurance for international students J1 students still subject to State Department requirements F1 students must maintain coverage as required by their school
So legally, where does that leave international students, since there is no obligation on international students to have ACA coverage? J1 students are still legally obligated to maintain coverage as set forth by the State Department. And F1 students – no legal obligation whatsoever to maintain coverage. Only as required by their school. So now let’s look at the options international students have for coverage.
6. Student Coverage Options, Post – ACA
- Student Group Plan – ACA Compliant
- Student Group Plan – ACA Exempt
- Individual International Student Plans
So if there’s no change to legal obligations facing students, what about schools? Really there’s very little change there. I’ll review 3 basic options, all of them good and valid approaches for a school to take, based on their individual circumstances. First ACA Compliant Group Plans, then ACA exempt group plans, and then individual plan options.
7. Student Group Plans – ACA Compliant
Here we see the basic requirements for a school plan to be ACA compliant – these requirements come from the Student Health Insurance regulations issued in March 2012.
Specific coverage requirements:
- No annual limits or lifetime limits permitted
- Preventative care: provided without cost-sharing
- No pre-existing condition limitations permitted
- Comprehensive coverage, can combine with domestic students
- Out-of-pockets can be higher, not as tailored to international needs, pre-ex covered from day one on campus, expensive
Starting January 1, an ACA plan cannot have an annual limit, it must offer unlimited coverage. And it cannot have lifetime limits. Preventative care must be provided without cost-sharing, and there can be no pre-existing limitation exclusion. Pre-existing conditions are medical conditions that you already have at the time you buy insurance, and the ACA does away with these limitations altogether.
The upside of an ACA compliant plan is your students will have comprehensive coverage. And you can combine your domestic students on the same plan. And for certain schools and certain states, there’s a political element to the decision. But there are downsides. Since ACA plans have to meet requirements that can be expensive – like covering all pre-existing conditions and having no limit – they are expensive. They also can have a lot of out of pocket expenses, where insurers try to get back some of the cost they are giving away with the other requirements.
I think the big one, that looks like a great enhancement for students but could really come back to bite, is covering all pre-existing conditions right away. That can be a good thing. But also, no one wants an international student coming to their school who is already in need of major medical care. And covering all pre-ex, from the first day in the country, really could be an attraction.
Next we’ll look at ACA exempt group plans.
- Student Group Plans - ACA Exempt
- Exempt as short-term, limited duration plans
- Customized plans can offer a good option, much as before ACA, typically:
- International provisions
- Maximum coverage between $100K to $500K
- Pre-existing condition waiting period 6 to 12 months
- More affordable option, with targeted coverage
Many good carriers have continued to offer school group coverage that is exempt from the ACA. The basis of that exemption is the short-term limited duration exemption we discussed earlier. And because they don’t have to meet the ACA requirements – like covering all pre-ex and having no policy maximum – they can save money there, and build in more international friendly provisions.
So these plans look a lot like the group plans you’ve always had for international students. They will have international specific provisions, like emergency evacuation, repatriation, bedside visit, trip interruption, etc. They will have a policy maximum, typically in the $100,000 to $500,000 range. They’ll often have a pre-existing condition waiting period. In the international student world, many plans would typically have a 6 or 12 month waiting period before the student would be covered for pre-existing conditions. This can be a good thing – again, no one wants a student coming specifically because they are already in need of major medical attention.
Which to choose – an ACA compliant plan, or a custom-built international student plan – will really depend on the circumstances of each school and the students they will be insuring.
Moving on to our third option,
8. Individual International Student Insurance Plans
- Many students need an individual plan
- Schools with no group plan or waiver option
- OPT, scholar, shorter programs
- Benefits for school – ease of administration, cost, students like it
- Downside – control for sub-par plans
Many schools do not offer a group plan, or in some cases, offer a group plan with a waiver option for students that can do better elsewhere. The number of schools without a group plan continues to grow, as the price-tag of group plans scares many off. Also many group plans do not cover all of the international students at a school appropriately, maybe J1s or OPT or ESL students, for instance, don’t qualify for your main plan.
The benefits of letting students get their own individual plan is one, the ease of administration. Administering a group plan and a waiver program can take a lot of time and energy, particularly for smaller schools. Students like it because of the choice and the cost. But the downside is, there are good plans and bad plans out there. So you really need to control for sub-par plans, with specific requirements or recommended plans.
- Individual Plan Options
- Most individual plans are not ACA plans (STLD)
- Custom-crafted for international students
- Can be very reasonably priced for the benefits
- A few individual plans with ACA benefits (but will likely disappear)
For students looking for an individual plan, there are good options out there, much like before the ACA. All carriers have made minor tweaks to their individual plans, as we have, to make sure they are built right to avoid accidentally falling under the ACA. Which means you can custom-craft plans with the best things for an international student plan. They don’t need lifetime coverage, so unlimited plans are not necessary. They need international specific provisions, like emergency evacuation, repatriation, trip interruption, bedside visit, etc. And you don’t want to attract students specifically for the insurance, so a reasonable pre-existing condition waiting period makes sense. And a big advantage is the price - you can custom build a plan to meet the specific needs of an international student at fairly reasonable rates.
There are a few international student individual plans designed with ACA benefits in mind. We offer one, and there’s one or two others out there. Mainly we do it for students at those schools that require those benefits. However, comparing what you get for the money to our other plans – the ones that don’t meet ACA guidelines, but have much more tailoring for international students – the other plans are better. And now with clarity on the mandate – international students do not need ACA coverage – I expect them to disappear over time.
9. State Healthcare Exchanges
Will international students be eligible for coverage?
Students on valid visas are “lawfully present”
Must be a “resident” of the state, inconsistent with student visa
Now we come to what seems to be the final area where we do not yet have a lot of clarity, and that’s the State Exchanges. We all know about the troubles launching Healthcare.gov, and that has made getting intel more difficult as well. The first open question is, will international students be eligible to buy a plan on the exchange? International students on valid visas are “lawfully present” as defined by the ACA. That is the list on healthcare.gov of eligible visa categories. But that just means you are in an eligible category – there are other requirements. A big one is residency. To get coverage through a state exchange, you must be a resident of that state, in accordance with the state’s legal residency requirements. State residency requirements typically include the concept of domicile, which means you have made the state your permanent home. And you can only have one domicile. So a student who is here for 1, 2, 3 years – their domicile is more than likely still their home country. The whole concept of state residency is inconsistent with a student visa, which is only given to those who do not intend to stay permanently.
What I could see is that those students that become resident aliens for IRS purposes could become eligible to buy on the exchange – that would make sense, as the ability to buy on the exchange would be tied to the requirement to have minimum essential coverage.
Will international students be eligible for subsidies?
- Some say no, some say perhaps
- Same residency issue
Second question, will international students be eligible for subsidies? This one is a bit tougher. There’s some weak intel out there saying yes, I think mainly it comes from a careless remark by one staffer or committee member. There’s a much stronger poition saying no. And the whole residency thing is still a problem in this case.
So we’ll watch this over time, my guess is that some of those students who are older, here longer, maybe with families, may start trying to get coverage and subsidies through the exchanges and then we’ll have a little more intel. If anyone has any stories or thoughts yet on this, please let us know.
10. Summary Slide
- International students exempt from mandate
- Insurance options are largely unchanged
- School group plans – ACA compliant
- School group plans - ACA exempt
- Individual international student plans
- State Exchanges – open questions still on eligibility for coverage and subsidies
To summarize briefly. International students are exempt from the mandate – they do not need to maintain minimum essential coverage, and will not owe a fine if the don’t. This is the single most important point. Options for international students, and for the schools they attend, are largely as before, but with additional ACA options thrown in. Meaning a school can provide an ACA compliant plan, an ACA exempt plan, or leave students to buy their own individual plan, from a reputable carrier. And there’s an open question at to what extent international students will be able to get coverage or subsidies through the exchanges.
11. Questions slide.
12. Thank you slide.
I’d like to thank you all for attending, and for your questions and engagement. I hope you found the presentation helpful. If you have any questions we didn't get to, or if you think of anything after, please shoot us an email and we’re happy to help.
Have a wonderful holiday season everyone. Bye now.
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