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:
· 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—
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:
Exemptions from the ACA requirements and IRS payments
§ 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”
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?
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:
Special Exemptions to Participating in the ACA / Obamacare Program
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).
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?
“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) ”
How does the IRS determine whether we actually live outside the USA?
*~ 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.
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) 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. ”
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
IRS fees Owed if you are a US citizen without qualifying health insurance protection:
~2014 TY: Families: $285 per family or 1 percent of total household income, whichever is greater.
~ 2015 TY: Families: $975 per family or 2 percent of income, whichever is greater.
~ 2016 TY: Families––$2,085 or 2.5 percent of income, whichever is greater.
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.** ~
(1) In general
Any applicable individual shall be treated as having minimum essential coverage for any month —
~ (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.)
**Details of US Federal Rules Governing Who Qualifies as a Non-Resident:
IRS Section 911 Rules:
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.
~ ~ ~ ~ ~ ~ ~ ~ ~ ~
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:
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.
***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);
~ 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.
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.
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.