Obamacare's Effects on American Expats Living Abroad

ACA – Obamacare’s Effects on American Expats Living Abroad

Are US citizens living or working abroad required to get affordable health care insurance or pay the penalty under the Patient Protection and Affordable Care Act (PPACA)?

If you are a US citizen or resident alien abroad and you meet the bona fide resident test or the physical presence test, you are considered to have essential minimum coverage under the Act and will not be required get affordable health care insurance or pay the penalty under the PPACA for the month or months that you qualify for either of these tests.

Can I still purchase a US health care insurance policy if I reside outside the United States?

No. In order to buy the insurance as an individual, you must be living in the US. 

How will Obamacare impact me as an expat? Will I owe taxes?

If you are a taxpayer that is considered a high-income earner:

·        Single filer with an AGI (adjusted gross income) over $200,000 

·        Married filing jointly with an AGI over $250,000 

·        Married filing separately with an AGI over $125,000 

·        Head of Household with an AGI over $200,000

·        Qualifying widow(er) with an AGI over $250,000

You will have to pay an additional 3.8% tax on net investment income which includes but is not limited to:

·        interest

·        dividends

·        capital gains

·        rental income

·        royalty income

·        non-qualified annuities

·        income from businesses involved in trading of financial instruments or commodities

·        businesses that are passive activities to the taxpayer 

USC 26 §5000A(f)(4)

(4)Individuals residing outside United States or residents of territories

Any applicable individual shall be treated as having minimum essential coverage for any month—

(A) if such month occurs during any period described in subparagraph (A) or (B) of section 911 (d)(1) which is applicable to the individual, or

(B) if such individual is a bona fide resident of any possession of the United States (as determined under section 937 (a)) for such month.

PPACA § 1312(f)(1)(A)(ii))

(f) QUALIFIED INDIVIDUALS AND EMPLOYERS; ACCESS LIMITED TO CITIZENS AND LAWFUL RESIDENTS.—

(1) QUALIFIED INDIVIDUALS.—In this title:

(A) IN GENERAL.—The term ‘‘qualified individual’’ means, with respect to an Exchange, an individual who—

(i) is seeking to enroll in a qualified health plan in the individual market offered through the Exchange; and

(ii) resides in the State that established the Exchange (except with respect to territorial agreements under section 1312(f)).

Americans who are NOT residents of the USA, do NOT have to participate if you meet the requirements of being a resident of another country (or if you are outside the USA for 330 days or more per year).   You can find more details below on Exemptions to ACA and how to qualify as a Non-Resident US citizen at:

https://www.healthcare.gov/exemptions/

Exemptions from the ACA requirements and IRS payments 
Under certain circumstances, you won’t have to make the individual responsibility payment. This is called an “exemption.”
You qualify for an exemption if:

§  You are outside the USA for more than 330 days that year, or

§  You’re uninsured for less than 3 months of the year, or

§  You have Medicare,  Medicaid, or some VA coverages, or

§  You have such low annual income that you are not required to file with the IRS:  see the IRS Interactive Tax Assistant (ITA).

The second item (from the Healthcare.gov websites) seems to mean that you can go back to the USA for up to 3 months without getting health insurance, but that is overruled by:

§  You qualify for an exemption to ACA / Obamacare if you are outside the USA at least 330 days per calendar year. (330 day “physical presence” rule)    http://www.irs.gov/pub/irs-pdf/p54.pdf

What if I go back to the USA for more than 35 days cumulative during a year? 330 day “Physical Presence Rule”
You must either be exempt due to insufficient annual income (under IRS exemption to filing rules, or you must get qualifying health care insurance coverage.

Some travel insurance policies qualify – but you would need 9 months of coverage*.   See the list of “Essential Health Benefits** (listed below: ~ “Essential Health Benefits”) that must be covered by qualifying insurance.

*NOTICE that there is a catch to having “travel insurance, called the ~ 3 month “Short Coverage Gap” Rule ~ . The IRS does not want us sneaking back to the USA for govt. subsidized expensive health care treatments, after we have previously avoided joining and avoided paying into the ACA healthcare system. They want us to “pay” if we want to “play”.

This means that if you are NOT exempt from ACA requirements (using the IRS rules on residency), then you MUST have 9 months of ACA qualifying health care coverage, or pay the 1% IRS fee in April 2015 (and higher percentages in the future).

What if I return to live in the USA during the year?
When you arrive in your US state of residency, there are special rules allowing people to sign up for insurance protection under the subsidized state insurance exchanges, even outside the open enrollment periods – where moving back to the USA is a “qualifying event” that allows you to enroll in your State Exchange within 30 days (?) of returning to your home state of residency in the USA.

The general public’s open enrollment period for ACA health coverage in 2014 closes on March 31, 2014, and does not reopen until 2015.

When you qualify as a Resident of the United States, then:
~ If you have no current medical insurance coverage, you can both enroll with a private insurance company, and pay your own premiums.
or
~ You can qualify for having minimum medical insurance by having Medicare (receiving SS retirement benefits), Medicaid, CHIP or other qualifying policies (like some VA coverages). (See Below**)
or
~ You can enroll in “State Insurance Exchanges” – insurance pools for each US state that cover people who either cannot afford or cannot get medical insurance coverage.  

Special Exemptions to Participating in the ACA / Obamacare Program
There are exemptions if you are a member of an approved religious sect (rejecting medical care on conscientious grounds), member of an Indian tribe, a convict, or have “annual household income lower than the amount specified section 1412(b)(1)(B) of the Patient Protection Affordable Care Act is less than the amount of gross income specified in section 6012(a)(1) ”

Specifically, if you are not required to file a tax return with the IRS, then you have NO responsibilities under the ACA / Obamacare.   To find out if you are required to file a federal tax return, use the IRS Interactive Tax Assistant (ITA).

http://www.irs.gov/uac/Questions-and-Answers-on-the-Individual-Shared-Responsibility-Provision  Item 6.5.

Note: If you are a part of a qualifying plan, like Medicare, Medicaid, CHP etc., then you do not have to enroll with a state exchange.

State Medicaid programs are projected to increase under the current ACA law, but many physicians refuse to take Medicaid patients because Medicaid does not pay enough to support the average $250,000 a year salary for most physicians. “State Exchanges” are expected to pick up much of the slack.   Contact your State Exchange to find out their current details and offerings.

The ACA law offers to reimburse the States 100% of the costs of these exchanges for 2014 – 2016, and then the Federal Govt is supposed to pay the States 90% of the costs, which made forming State exchanges tasty to many Governors – which explains why states like Colorado, Oregon, and Washington found they could represent their own citizens better and make better health care decisions for their state, than turning over all the power and choices to the Federal government.

ACA and NON Residents of the USA:  Excluded or Not Excluded?
Specifically the ACA website says:

U.S. citizens living outside the U.S.

U.S. citizens living in a foreign country are not required to get health insurance coverage under the Affordable Care Act. If you’re uninsured and living abroad, you don’t have to pay the fee that other uninsured U.S. citizens may have to pay.

To meet this requirement/exemption, you must meet either the IRS “330 day Physical Presence Test” (outside the USA for 330 or more days a year) or meet the IRS “bona fide” residence test requirements. For details on these 2 rules/exemptions, keep reading.

Generally, health insurance coverage in the Marketplace covers health care provided by doctors, hospitals, and medical services within the United States. If you’re living abroad, it’s important to know this before you consider buying Marketplace insurance.

Questions? Call 1-800-318-2596, 24 hours a day, 7 days a week. (TTY: 1-855-889-4325) ”

https://www.healthcare.gov/am-i-eligible-for-coverage-in-the-marketplace/

How does the IRS determine whether we actually live outside the USA?
The US Govt. determines if we officially “live outside the USA” in one of 2 ways.   In the simplest case, to qualify for the ACA Foreign exclusion:

*~ We can be outside of the USA for at least 330 days in a calendar year to qualify. This is known as the “Physical Presence Test” – to prove that we are NOT residents of the USA for IRS and ACA purposes.
or
*~ We must qualify under IRS requirements to be a “bona fide resident” (permanent resident) of a foreign country.  http://www.irs.gov/pub/irs-pdf/f2555.pdf

Key parts of meeting the IRS requirements for qualifying as a “bona fide resident” of another country, are covered by IRS Form 2555,    Question 13:
13 a. Have you submitted a statement to the authorities of the foreign country where you claim bona fide residence that you are not a resident of that country? See instructions. Yes or No

(13) b. Are you required to pay income tax to the country where you claim bona fide residence? See instructions. Yes or No

If you answered “Yes” to 13a and “No” to 13b, you do not qualify as a bona fide resident. Do not complete the rest of this part. 

For more details, see:  http://www.irs.gov/pub/irs-pdf/p54.pdf  and http://www.irs.gov/publications/p54/ch01.html

As we can see, we must be residents of another country to qualify – which points to Residente Temporal and Residente Permanentes only qualify for the EXEMPTION if they are out of the USA more than 330 days, in this year or past years…..   while VISITORS on 6 month visas – who are not required to pay income taxes in Mexico – owe for ACA insurance coverage or pay the IRS penalty.     For those with TIP cars and Visitors/visitante visas.

3 month “Short Coverage Gap” Rule
One Additional Twist:  Under the Short coverage gap rule, you are formally exempted from ACA requirements if you “went without coverage for less than three consecutive months during the year.”    http://www.irs.gov/uac/Questions-and-Answers-on-the-Individual-Shared-Responsibility-Provision

IRS fees Owed if you are a US citizen without qualifying health insurance protection:
If you are a US citizen and a Resident, without a medical coverage plan, then you will have to pay the following “Taxes” / “fees”(?) / penalties(?) on your TY 2014 Federal income tax return (filed by April, 2015):

~2014 TY: Families: $285 per family or 1 percent of total household income, whichever is greater.
Individual adults pay the greater of $95 each or 1%.

~ 2015 TY: Families: $975 per family or 2 percent of income, whichever is greater.
Individual adults pay the greater of $325 each or 2%.

~ 2016 TY: Families––$2,085 or 2.5 percent of income, whichever is greater.
Individual adults pay the greater of $695 each or 2.5%.

These rules directly affect between 5-10 million US citizens living outside of the US, unless you can prove that you are not a US Resident.** ~


Official ACA – Obamacare description of the rules governing Non-Residents:
“CHAPTER 48—MAINTENANCE OF MINIMUM ESSENTIAL COVERAGE
(a) Requirement to maintain minimum essential coverage
An applicable individual shall for each month beginning after 2013 ensure that the individual, and any dependent of the individual who is an applicable individual, is covered under minimum essential coverage for such month.
.  .  .
(f) Minimum essential coverage
For purposes of this section

(1) In general
The term “minimum essential coverage” means any of the following:
(Medicare, Medicaid, CHIP programs, some VA medical coverages)**
. . .
(4) Individuals residing outside United States or residents of territories.

Any applicable individual shall be treated as having minimum essential coverage for any month —
~ (A) if such month occurs during any period described in subparagraph (A) or (B) of section 911(d)(1) which is applicable to the individual, or

~ (B) if such individual is a bona fide resident of any possession of the United States (as determined under section 937(a)) for such month. (then they must get medical coverage.)
U.S.C. Title 26 – INTERNAL REVENUE CODE

**Details of US Federal Rules Governing Who Qualifies as a Non-Resident:
The current government regulation for determining who qualifies as a Non-Resident US Citizen is Section 911 of the IRS code.     Until further notice, the US Govt. uses the current standard IRS definitions for “tax home”, “bona fide residence”, “physical presence”, etc to determine if a taxpayer qualifies for the foreign income exclusion and hence being exempt from ACA – Obamacare’s provisions. In typical government fashion, one step involves proving a negative: You have to prove that you are not a “bona fide resident” of the USA or any of its possessions.

IRS Section 911 Rules:
” (d) Definitions and special rules
For purposes of this section—
(1) Qualified individual
The term “qualified individual” means an individual whose tax home is in a foreign country and who is—
(A) a citizen of the United States and establishes to the satisfaction of the Secretary that he has been a bona fide resident of a foreign country or countries for an uninterrupted period which includes an entire taxable year, or
(B) a citizen or resident of the United States and who, during any period of 12 consecutive months, is present in a foreign country or countries during at least 330 full days in such period. ”

From: 26 USC § 911 – Citizens or residents of the United States living abroad | LII / Legal Information Institute

Based on Section 911,   qualifying Non-Residents must prove that they are not a   “bona fide resident” of the USA nor do they have a   “tax home” inside the United States.     Typical retirees currently living full-time in Mexico can use their Mexican address for all IRS filings to meet some of the qualifications as a Non-Resident.

The “Tax home” and “Physical presence” burdens of proof are more complicated.     

See:
~ Foreign Earned Income Exclusion – Bona Fide Residence Test,
~ Foreign Earned Income Exclusion – Tax Home in Foreign Country, and
~ Foreign Earned Income Exclusion – Physical Presence Test
in the official IRS publications for details.  

For details go to:
http://www.irs.gov/pub/irs-pdf/p54.pdf ~ and ~https://www.gpo.gov/fdsys/pkg/USCODE-2011-title26/html/USCODE-2011-title26-subtitleD-chap48.htm

~  ~  ~  ~  ~  ~  ~  ~  ~  ~
Minimum Essential Coverage” versus “Essential Health Benefits
Hint: Don’t confuse them…

Minimum Essential Coverage describes what plans are acceptable (Medicare, Medicaid, etc.), while “Essential Health Benefits” describe what specific items a qualifying plan must cover (prescription drugs, Emergency Services, etc.). See our Essential Health Benefits section for more details below. ***

**The term “minimum essential coverage” specifically means:
“~ (1) In general
The term “minimum essential coverage” means any of the
following:
~ (A) Government sponsored programs
Coverage under –
~ (i) the Medicare program under part A of title XVIII of the Social Security Act,
~ (ii) the Medicaid program under title XIX of the Social Security Act,
~ (iii) the CHIP program under title XXI of the Social Security Act,
~ (iv) medical coverage under chapter 55 of title 10, United States Code, including coverage under the TRICARE program;
~ (v) a health care program under chapter 17 or 18 of title 38, United States Code, as determined by the Secretary of Veterans Affairs, in coordination with the Secretary of Health and Human Services and the Secretary,
~ (vi) a health plan under section 2504(e) of title 22, United States Code (relating to Peace Corps volunteers); or
~ (vii) the Nonappropriated Fund Health Benefits Program of the Department of Defense, established under section 349 of the National Defense Authorization Act for Fiscal Year 1995 (Public Law 103-337; 10 U.S.C. 1587 note).
~ (B) Employer-sponsored plan
Coverage under an eligible employer-sponsored plan.
~ (C) Plans in the individual market
Coverage under a health plan offered in the individual market within a State.
~ (D) Grandfathered health plan
Coverage under a grandfathered health plan.
~ (E) Other coverage
Such other health benefits coverage, such as a State health benefits risk pool, as the Secretary of Health and Human Services, in coordination with the Secretary, recognizes for purposes of this subsection.
~ (2) Eligible employer-sponsored plan
The term “eligible employer-sponsored plan” means, with respect to any employee, a group health plan or group health insurance coverage offered by an employer to the employee which is
~ (A) a governmental plan (within the meaning of section 2791(d)(8) of the Public Health Service Act), or
~ (B) any other plan or coverage offered in the small or large group market within a State.

Such term shall include a grandfathered health plan described in paragraph (1)(D) offered in a group market.”

If you want to join an insurance exchange and want coverage starting Jan. 1, 2014, you must enroll by Dec. 15, 2014.  Open enrollment for health coverage in 2014 closes on March 31, 2014.

====================
What are the essential benefits that a qualifying foreign health care insurance program or travel health care insurance policy must cover? ~

***Essential Health Benefits must include items and services within at least the following 10 categories:

~ Ambulatory patient services (doctor’s office visits);

~ Emergency services (ER visits);

~ Hospitalization;

~ Maternity and newborn care (this is waived for men, and likely for clearly post-menopausal women);

~ Mental health and substance use disorder services, including behavioral health treatment;

~ Prescription drugs;

~ Rehabilitative and habilitative services and devices;

~ Laboratory services;

~ Preventive and wellness services and chronic disease management; and

~ Pediatric services, including oral and vision care.
https://www.healthcare.gov/…ial-health-benefits/

Note that if you return to the USA for more than 3 months, your foreign health care plan must also cover these items for treatment in the USA. E.g. IMSS from Mexico does not cover treatments in the USA.

====================
I live abroad, but I want to participate in ACA / Obamacare:
In this case, you are may return to the USA for expensive medical care, and you want to be a part of a big insurance pool – and get government subsidies to help pay for your insurance protection in the one state I plan to reside in.

According to an advanced expert on the Marketplace helpline, you must be a Resident of the state where you apply for healthcare coverage with a state exchange. There are some multi-state coverage plans (with reciprocity agreements) like the Kansas, Missouri, and Oklahoma group (that allow you to get treatment in more than one state), but you still must be a resident of one of those states.

A specialist on the Healthcare.gov help line, who has special advanced training, researched the options for expats living abroad reports that: They can use the US addresses of family members or friends in the state that they expect to reside in, to apply for ACA / Obamacare insurance coverage in that state’s exchange program, making the application before they return to the USA.

Disclaimer: This information is not meant as legal advice. It is for educational and informational purposes only. Government policies vary between States and offices, so, your personal experiences may vary. See a professional for advice on important issues.



Please contact us by using the form below:



First Name *
Last Name *
E-Mail *
Phone Number
Current Country of Residence
Best Method of Contact
Years to file 2014
2015
2016
2017
Other
Last tax year a return was filed with the IRS
Type of Employment
Do you own a rental property
Comments

Get In Touch


Featured Articles


Subscribe to our Emailed Newsletter