Legitimate Expats Excluded From Obamacare Health Insurance Mandate

[Jingthing]

As the USA Obamacare mandate big in the news now eventually comes fully into effect, expats are going to wonder if they are exempt or not from the requirement to have some kind of USA health insurance. Without that exemption, Americans will be subject to a "tax" if they do not have USA health insurance.

This issue came up before and I believe the consensus (and all I can find so far on the web) is that expats ARE exempt.

The issue then is who qualifies as a bona fide expat to qualify for this exclusion?

This link gives a clue:

http://www.globalsur...know-66920.html

But what does this all mean for American expatriates living abroad? While some of the healthcare reform bill, such as the increased Medicare payroll taxes, may affect expatriates, in general the mandate for health insurance and the penalties for not obtaining it will not affect them. In the new Internal Revenue Service (IRS) tax code, expatriates are treated as if they have health insurance regardless of whether they do or not. Although in order to be exempted from the insurance mandate, American expatriates must already be eligible for the IRS’ foreign earned income exclusion.

In order to meet the criteria for the exclusion that allows U.S. expats to avoid paying U.S. taxes on their first US$91,500 worth of income, the expatriate must have a tax home (the general area of your main place of business or employment where you happen to be permanently or indefinitely engaged) in a foreign country, as well as be either a legitimate resident in that country, or spend at least 330 days a year outside the United States.

If this is true, maybe this implies if you are in the USA on a trip for longer than about 35 days in a given year, you won't be exempt for that year?

Anyway, I'm sure questions about this will continue as the law goes into effect

[rakman]

The problem with the law is it's not all written. The H&HS secretary gets to define most if not all points. So the surprises are still to come.

I would expect, like the tax laws, that even out of the US, you'll either have to have a policy you can't use, or pay the penalty, where the penalty will be cheaper than the policy.

[Jingthing]

I'm pretty sure you're wrong. Real expats are excluded. We've been over this before here.

[taxout]

Yes, when it comes to the tax penalty for not having health insurance, the legislation borrowed the test from the Section 911 Earned Income Exclusion: tax home overseas plus either 330/365 days overseas presence or bona-fide foreign residency. Thus if you qualify for the earned income exclusion you don't have to worry about having US health insurance. And vice versa. As discussed here before, "tax home" is a concept that applies awkwardly to retirees, since it's a requirement intended for those who are working and earning income.

The problem -- among several no doubt -- is that health insurers will continue to offer insurance only to residents of a particular state, since rates will vary geographically. If you're not a resident of a US state within the meaning of an insurance policy, you're not going to be able to get insurance. And if you do claim residency on a questionable basis, the insurer can deny your claims.

In short, there's no meshing between the tax penalty and insurance policy requirements. And I think we all know the practical problems here: just try to get health insurance for a two-month visit back to the States.

As I recall, there is a procedure under which you can ask for waiver of the penalty on the grounds of hardship, but nobody likes to beg for anything from the IRS. And that still doesn't get you insurance for your two-month visit back to the States.

If there's any message in the health care act -- and in the legislative process that produced the act -- it's that the insurance companies are in control.

Now more than ever.

[Jingthing]

OK, now we're getting to nitty gritty. Say you think you are excluded but want to spend two months in the USA one year. So does that mean you must pay the tax that year? If you could obtain a travel insurance policy for that period, would that suffice to avoid the penalty?

[lannarebirth]

If there's any message in the health care act -- and in the legislative process that produced the act -- it's that the insurance companies are in control.

Now more than ever.

Amen!

[taxout]

As I recall, the penalty is pro-rated: you pay it only for the months you should have had insurance but didn't.

Assume you've got a good 330/365 period that ends in June when you go back to the States for three months. When you return in September, you start another good 330/365 period. As I understand it, you pay the penalty only for the summer months when you didn't qualify under the 911 test. Whether that's three months or two months or one month may vary depending on how often you were in the States during the two 330/365 periods.

The important point is that in the past, only those with foreign earned income using the exclusion had to worry about qualifying under the 911 tests. Now, it's a problem for everyone. Miscalculate and that trip back to the States could become much more expensive than you'd thought.

In any event, once the tax kicks in, a visit back to the States may start to include one more cost in addition to airfare, food and lodging: health care insurance or the penalty tax. Not to mention one more tax form to complete.

As to what policies qualify, they're policies meeting the standards the government has yet to announce.

[rakman]

I'm pretty sure you're wrong. Real expats are excluded. We've been over this before here.

With passing the "Affordable Health Care Law", Congress gave authority to the H&HS Secretary to fill in the blanks. Now that the law has been deemed a "tax", who knows what changes will be needed to fund this monstrosity. Don't be surprised if the long arm of Uncle Sam comes reaching for your wallet.

[taxout]

It's always best to start with the law itself. The statute is clear that there's an exemption for Americans overseas tied to Section 911. The Secretary of Health and Human Services can not override it, though the Treasury Department can issue regulations interpreting it.

"Any applicable individual shall be treated as having minimum essential coverage for any month . . . if such month occurs during any period described in subparagraph (A) or ( B ) of section 911(d)(1) which is applicable to the individual." IRC Sec. 5000A(f)(4)(A).

Unless and until Congress amends it, that's the law.

[pmarlin]

also, some expacts like those 65 and over have mdicare and retired US Military have TRICARE which qualfies has the required insurance coverage. Other retired may have insurance plans in thier retirement plans that qualifies. they are insured. The law goes after the uninsured.

[Javabear]

The way section 911 reads is that you need to be outside the US for 330 days out of any 365 day period. This means that you can stay in the US for 70 days as long as you were outside the US for 330 days prior and remaian outside the US for 330 days after. The first 365 day period would end on day 35 of your visit and the next 365 day period would begin on day 36.

[cmsally]

If there's any message in the health care act -- and in the legislative process that produced the act -- it's that the insurance companies are in control.

Now more than ever.

Amen!

A very good friend of one of my best friends (in the US) happens to own both a hospital and an insurance company. One wonders if this is perhaps the norm.

[mamypoko]

Does anyone know if vets with VA benefits will be required to to purchase reg. insurance?

[Jingthing]

I've read the posts so far about the rules for travel to the US and as this concept is new to me, I must admit I am totally confused about them. Can someone point to a information link which spells this all out very clearly?

[taxout]

"The way section 911 reads is that you need to be outside the US for 330 days out of any 365 day period. This means that you can stay in the US for 70 days as long as you were outside the US for 330 days prior and remaian outside the US for 330 days after. The first 365 day period would end on day 35 of your visit and the next 365 day period would begin on day 36."

But if you try this and stay outside the US for 70 days, then you're making would could turn out to be quite an expensive bet that nothing would require you to head back to the States in the next 330-day period.

[Javabear]

"The way section 911 reads is that you need to be outside the US for 330 days out of any 365 day period. This means that you can stay in the US for 70 days as long as you were outside the US for 330 days prior and remaian outside the US for 330 days after. The first 365 day period would end on day 35 of your visit and the next 365 day period would begin on day 36."

But if you try this and stay outside the US for 70 days, then you're making would could turn out to be quite an expensive bet that nothing would require you to head back to the States in the next 330-day period.

Agreed. I don't recommend this but it could be done if need be.

[meand]

I love it, require me to buy a product, never mind that I might not even believe in said product. And make this product have overhead costs so that I have to pay more for the actual service needed that would otherwise. What is the big mystery, health insurance based systems are necessarily more expensive -- so why use them (unless you're an insurance company owner)? Whatever we do, the money should go straight to the hospitals, that much I am sure of.

[Martian]

I only go back to the states for 21 days in a once-a year trip. This way if a couple of emergencies should arrise, I have close to a week for each emergency and can still retain exemption under the 330 days test.

[Pib]

Does anyone know if vets with VA benefits will be required to to purchase reg. insurance?

Per below quote/Linkfrom Healthcare.gov you will not be required.

Veterans and the Affordable Care Act

Our nation is committed to the men and women who have served this country. That is why the Affordable Care Act brings new choices in health care for veterans like you – and your family.

The Affordable Care Act does not affect the health care you may already receive from the Veterans Health Administration (VHA). If you are eligible for VA health care, you will remain eligible under health reform. But it’s important to know that nothing in the legislation will affect your access to the care you currently receive. Nor does the Act change the TRICARE or TRICARE for Life benefits your family may receive. In addition:

• If you are a veteran enrolled in the VA health program, you do not need to obtain additional coverage. You may purchase additional coverage if you want, but there is nothing in the law requiring you to do so.
  
• Even if you receive VA health care, under the law you will have a new option to enroll in an additional insurance plan through the new health insurance Exchanges, which open in 2014.
  
• If you are a veteran with private insurance coverage, you will benefit from the new consumer protections. This means that you will not be dropped from your insurance company if you get sick or injured and you won’t have to worry about lifetime limits on how much insurance companies will cover if you get sick.
  
• If you are a veteran who is not eligible for VA health care or other coverage, you and your family may be eligible to receive tax credits for insurance you buy in the exchanges. The exchanges will provide access to much needed care to Veterans who are uninsured and who not eligible for VA health care.
  

[OriginalPoster]

Most of the posts in this thread are approaching the issue from the point of view of an expat who doesn't want to participate in Obamacare. But suppose that you're a legitimate expat in Thailand but have the option of moving back to to the States if you want. Suppose further that you have no health insurance in Thailand and then you are diagnosed with cancer some other condition for which ongoing treatment will be necessary. Under Obamacare, insurers cannot exclude you from buying a policy because of a pre-existing condition. Does does it follow that an expat could live in Thailand until they get sick, then move back to the States, purchase a policy, and immediately have coverage for their on-going treatment?

[meand]

Most of the posts in this thread are approaching the issue from the point of view of an expat who doesn't want to participate in Obamacare. But suppose that you're a legitimate expat in Thailand but have the option of moving back to to the States if you want. Suppose further that you have no health insurance in Thailand and then you are diagnosed with cancer some other condition for which ongoing treatment will be necessary. Under Obamacare, insurers cannot exclude you from buying a policy because of a pre-existing condition. Does does it follow that an expat could live in Thailand until they get sick, then move back to the States, purchase a policy, and immediately have coverage for their on-going treatment?

This is the information i'm more interested in as well. I would guess all insured will have a card, and if you don't have one (yet are a citizen) and see a doctor, maybe you will be forced to buy a policy? Or, as you say, maybe you can opt to buy one before a visit if that was a possibility. In pretty much any case, sounds like a much improved system for expats and US residing citizens alike.

[Jingthing]

Obamacare is NOT universal, nationalized health care. It is a hodge podge. There will still be many millions of uninsured Americans even under Obamacare. Obamacare is just a start, a work in progress. There will be a reduction of the numbers of uninsured. If y'all wanted universal health care, as I did, I guess we didn't work hard enough because it wasn't even discussed! As far as expats coming home under Medicare age, it is my current understanding they will be able to purchase insurance (if they can afford it) upon repatriation and there will be no preexisting conditions exclusions. (Which is fantastic.) If they can't afford the insurance they need to attempt to get onto a subsidized program like Medicaid. Also note IF the republicans elect their man and get a senate majority, they are on record that they intend to repeal Obamacare. Even if they can't repeal it, they are likely to employ any legal tactics they can to not actually support Obamacare. It ain't over.

[gregb]

Expect to see all kinds of commercials about families who are forced to stop paying the mortgage because they can't afford to pay for both the house and buy health care. Is your house price falling? It is because of Obamacare. Your small business experiencing a slump in sales? It is because that money was diverted to Obamacare. Expect to see pictures of children being forced to live in squalid 1 bedroom apartments because of the crushing burden of health care that Obamacare did nothing to alleviate. By merely forcing everyone to buy overpriced healthcare that they can't afford in preference to other things they can't afford, the government has necessarily created a condition whereby industries other than healthcare will suffer, or at least, that is what the commercials will tell you. So unless you are a hospital or work in the medical profession, Obamacare is destroying your economic well being.

All Obamacare did is give the Republicans a nearly guaranteed win in the coming elections. I would strongly support universal healthcare. It is criminal the US does not have this. Obamacare is an abomination though. It is worse than doing nothing.

[Jingthing]

Obamacare is NOT going to be the most important issue in the US election. Also, it's a wash and many people like the benefits of it.

Anyway, people who may be moving back to US will find this interesting. The SUBSIDIES for middle class Americans needing to purchase insurance privately are VERY GENEROUS. Much better than the status quo. Hopefully, most poorer people can get on expanded Medicaid, but of course the republicans are trying to block that. People with insurance from employers still get insurance from employers. If a middle class person chooses not to insure (if no employer insurance) even with the very generous government subsidies, they can choose to pay the Obamacare "penalty/tax" instead which is much lower than paying for the insurance, but no insurance then. For Romneycare in Massachusetts, ironically Obamacare's opponent Romney is the father of the core principles of Obamacare, only ONE PERCENT of people there are actually in a position to be liable for the tax penalty. As good as single payer? Not a chance. Better than the status quo? Absolutely.

If you don't believe me about the generous subsidies for middle income people, punch some numbers in this form, and you will be amazed:

http://healthreform.kff.org/en/subsidycalculator.aspx

[OriginalPoster]

Obamacare is NOT going to be the most important issue in the US election. Also, it's a wash and many people like the benefits of it.

Anyway, people who may be moving back to US will find this interesting. The SUBSIDIES for middle class Americans needing to purchase insurance privately are VERY GENEROUS. Much better than the status quo. Hopefully, most poorer people can get on expanded Medicaid, but of course the republicans are trying to block that. People with insurance from employers still get insurance from employers. If a middle class person chooses not to insure (if no employer insurance) even with the very generous government subsidies, they can choose to pay the Obamacare "penalty/tax" instead which is much lower than paying for the insurance, but no insurance then. For Romneycare in Massachusetts, ironically Obamacare's opponent Romney is the father of the core principles of Obamacare, only ONE PERCENT of people there are actually in a position to be liable for the tax penalty. As good as single payer? Not a chance. Better than the status quo? Absolutely.

If you don't believe me about the generous subsidies for middle income people, punch some numbers in this form, and you will be amazed:

http://healthreform....calculator.aspx

According to that calculator, a 50 year old person who earns $50,000 per year would pay $6,978 in healthcare premiums and get $0 tax credit from the government. Sounds like a sweet deal.

[Jingthing]

If earning 35K, the premium would be 3325. Again the majority of people get insurance anyway from employers and a person can opt out and pay a penalty/tax. No, its not perfect, but remember ANYONE can buy insurance under Obamacare. No preexisting conditions issues.

Also try punching in low income: MEDICAID.

[Pib]

Obamacare is NOT going to be the most important issue in the US election. Also, it's a wash and many people like the benefits of it.

Anyway, people who may be moving back to US will find this interesting. The SUBSIDIES for middle class Americans needing to purchase insurance privately are VERY GENEROUS. Much better than the status quo. Hopefully, most poorer people can get on expanded Medicaid, but of course the republicans are trying to block that. People with insurance from employers still get insurance from employers. If a middle class person chooses not to insure (if no employer insurance) even with the very generous government subsidies, they can choose to pay the Obamacare "penalty/tax" instead which is much lower than paying for the insurance, but no insurance then. For Romneycare in Massachusetts, ironically Obamacare's opponent Romney is the father of the core principles of Obamacare, only ONE PERCENT of people there are actually in a position to be liable for the tax penalty. As good as single payer? Not a chance. Better than the status quo? Absolutely.

If you don't believe me about the generous subsidies for middle income people, punch some numbers in this form, and you will be amazed:

http://healthreform....calculator.aspx

According to that calculator, a 50 year old person who earns $50,000 per year would pay $6,978 in healthcare premiums and get $0 tax credit from the government. Sounds like a sweet deal.

Well, that person just needs to take a paycut to $46,021 and then he gets a $2,608 tax credit; above $46,021 it goes to zero tax credit. However, along with the paycut of almost $4K in order to get the $2.6K tax credit he's now also paying an $4,372 yearly health care premium which works out to an effective "money-in-pocket-to-buy-other-things" reduction of over $8K--but he at least he's paying for his own health insurance vs getting the govt (other taxpayers) to foot the bill.

If I was that person and hadn't didn't have insurance I would probably continue with no health insurance and just pay the tax fine which would initially be around $1012 according to this Tax Fine Article/Link.

[Jingthing]

Yes, but the penalty/tax is scheduled to INCREASE as a percentage of income over time. Yes some people will play the game of paying the tax and then insuring when needed. That's another reason SINGLE PAYER is better. No chance of doing that with single payer. Again though, looking at the example set by Romneycare, only one percent end up paying the tax/penalty under that program. Yet again, most people have insurance from employers and poor people are supposed to get Medicaid, and old people already have Medicare, so we are only talking about a minority percentage in the market to self insure privately.

A perfectly fair system doesn't exist. However, I am confident over time Obamacare will be seen as an improvement over the status quo, just as Romneycare (same basic principles) is seen in Massachusetts.

BTW, all the people from the civilized countries with nationalized health care programs, as it SHOULD be, must think the USA is very crazy to have such a complex, hodge podge health system (both before Obamacare and after). So many Americans feel the same way!

[3SoiDogNight]

I live here in Thailand and have no plans to move back to the US. My Thai employer provides me with health insurance. It's not the best insurance policy and I plan on buying BUPA insurance.

Will insurance based here in Thailand be recognized by Obamacare?

Some BUPA policies cover members when visiting another country. Just asking for when I go visit the US on vacation.

[Jingthing]

I live here in Thailand and have no plans to move back to the US. My Thai employer provides me with health insurance. It's not the best insurance policy and I plan on buying BUPA insurance.

Will insurance based here in Thailand be recognized by Obamacare?

Some BUPA policies cover members when visiting another country. Just asking for when I go visit the US on vacation.

As discussed a number of times already, bona fide expats are exempt from the USA insurance requirement and the penalty/tax for not having it. As such, your personal interest in the program would come into play IF you repatriate.