The Affordable Care Act (ACA), also commonly referred to as ‘Obamacare’, is renowned for its ubiquitous presence in news headlines worldwide, as it is often hailed for its revolutionary impact on the American healthcare system.
Enacted in 2010, this regulation has made it compulsory for all US taxpayers to secure health insurance that is compliant with ACA regulations. These regulations carry a wide span of implications for both outbound expats leaving the US (who remain US taxpayers) and foreign inbound expats moving to the US.
ACA regulations can be a cause for concern for expats looking to secure international health insurance that covers them both in the US and abroad. Expats who have not secured ACA compliant plans are being charged hefty fines, often without knowing that they were susceptible to these charges.
Traditionally, globally mobile expats who purchased international plans also had to purchase an additional local plan to adhere to ACA laws because international health insurance policies did not comply with its regulations. This has changed as of early November, and now a select number of insurance providers are providing international plans with the additional benefit of being ACA compliant. This article by insurance adviser Pacific Prime Singapore reveals how the ACA is affecting expats and highlights the insurance options available to them.
How are expats affected by ACA regulations?
The US is known for its strict healthcare laws, which follows a “play or pay” policy when it comes to securing plans that meet ACA regulations. With regards to Donald Trump’s recent presidential victory, CNN revealed that although the President-Elect openly expressed his desire to repeal the ACA, it still remains uncertain as to whether it will be amended or repealed. Pacific Prime Singapore predicts that even if the ACA law is changed, the chances are high that any changes will likely not come into effect for at least a few years which means any current plans will remain unchanged for the time being. For now, ACA regulations are still enforced by a number of mandates, one of its core features being the Individual Mandate.
What is the Individual Mandate?
As set out in the Individual Mandate, all US taxpayers are required to have health insurance that meets their Minimum Essential Coverage (MEC), also known as ‘qualifying health coverage’. Most local insurance plans in the US will meet the MEC requirements, but a lot of expats will find that their international insurance does not, and if they have not secured a local plan they will be charged hefty fines.
The Individual Mandate applies to:
* US citizens
* Legal US residents
* Resident aliens
* Non-resident aliens
Those that are exempt from the Individual Mandate include:
* Bona Fide foreign residents
* Those that are out of the US for 330 days of the tax year. Please be aware that if you will be in the US for over 35 days without an ACA compliant plan, you will still be subject to penalties.
* Holders of diplomatic visa A or G
* Certain student visa holders
* Those who meet hardship exemptions
In short, as a general rule of thumb all US taxpayers are required to secure an ACA compliant plan to avoid potentially hefty fines, namely the Individual Shared Responsibility Provision penalty.
What is the Individual Shared Responsibility payment?
The Individual Shared Responsibility payment is a penalty charged by the Internal Revenue Service (IRS). If taxpayers fail to prove that they have met their MEC requirements, the Individual Shared Responsibility penalty in 2016 will be applied in two ways:
* Per person: US$695 per adult and US$347.50 per dependant; or
* Taken out as a percentage of your household income: 2.5% of your income over the tax-filing threshold of your filing status
The fine charged is whichever calculation works out to be greater. To avoid these fines and be covered both in the US and worldwide, expats will need to consider the insurance options available to them.
Insurance options for US inbound and outbound expats
Generally speaking, US taxpaying expats that are required to meet their MEC will either choose to pay the Individual Shared Responsibility penalty or buy a plan that is ACA compliant to avoid paying the fine. Expats opting for the latter, which is to secure international coverage that also meets MEC requirements in the US, will have two options to consider. One option is to purchase a local US plan on top of a non-compliant global plan, and the other option is to secure an ACA compliant international plan.
Both these options come with their own unique benefits, and the perfect plan for you will depend on your specific circumstances, preferences, and requirements.
Buying a non-compliant global plan and a local plan
Inbound and outbound expats looking to avoid paying fines may choose to purchase both a local plan and a non-compliant global plan so that they get to enjoy coverage both in the US and overseas. The majority of expats with international health insurance will be on a non-ACA compliant plan, as it is not until recently that ACA compliant plans became available.
Those that choose to secure a non-compliant plan will enjoy the following benefits:
* Product flexibility is usually higher for non-compliant global plans, so you can choose to take out the coverage benefits that you definitely won’t need
* You won’t need a US address to secure this type of insurance
* Premiums are usually lower for non-compliant global plans in lower product tiers, especially for singles or people with lower income levels. This means you will have greater product savings
Those looking to secure all benefits under one policy may prefer to shop around for the recently available ACA compliant global plans.
Buying an ACA compliant global plan
ACA compliant global plans cover you both in the US and abroad all under one policy. Despite talks of President-Elect Trump potentially amending or overhauling the ACA, it is likely that insurers will hold off on making changes to the ACA compliant benefit on these types of plan until the political climate settles down. Ultimately, Pacific Prime Singapore believes that the nature of the plans (global coverage including the US aimed at expats) will not change immensely.
ACA compliant global plans offer:
* As this completely portable plan offers benefits all under one single policy, there is no hassle having to purchase two separate plans
* This plan looks and feels like a US plan
* You can enrol anytime, as there is no need to wait for the ACA open enrolment period with this type of plan
To find out more, the global partner of Pacific Prime Singapore, Pacific Prime, has an entire section on its website about the ACA.
About the author
More about Pacific Prime Singapore can be found here, including details of how to access its team of experienced international health insurance advisers.