by Dr. Steve Fry, Yucalandia.com/Surviving Yucatan blog
This article is for all the Americans traveling or living abroad who have, so far, avoided learning about the Affordable Care Act (ACA). With the upcoming Oct. 1, 2013 – March 31, 2014 enrollment period, for ACA – Obamacare, there are bundles of questions that arise affecting US citizens who are outside the USA.
Are US citizens outside the US covered / protected by the ACA?
Are we exempt?
Is coverage only offered within the US (like Medicare), requiring citizens outside the US to travel for care?
Are expats forced to pay for a US insurance plan, even if they cannot receive care under the plan outside the US?
What fines (a.k.a. "taxes" in US Supreme Court lingo), must be paid for not enrolling in a US health plan?
The full answers will all be revealed in due time, since MOST of the significant parts of Obamacare do not take affect until 2014, and Congress may overturn these provisions before then.
After 2013, there are the penalties ("taxes" assessed by the IRS) for not enrolling in an US approved plan. Americans who are NOT residents of the USA, do NOT have to participate. More will be described below on how to qualify as a Non-Resident US citizen.
If you qualify as a Resident of the United States, then:
~ If you have no current medical insurance coverage, you can either enroll with existing insurance company, and pay your own premiums.
~ 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**)
~ You can enroll in "State Insurance Exchanges" – insurance pools that will likely be created by each US state to cover people who either cannot afford or cannot get medical insurance coverage.
Note: 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).
State Medicaid programs are projected to increase under the current ACA law, but many 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.
One catch to all of this: State Exchanges are just being formed and approved as of Oct. 1, 2013.
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, making forming State exchanges tasty to many Governors.
ACA and NON Residents of the USA: Excluded or Not Excluded?
Specifically the ACA website says:
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.
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)"
That leaves us with the issue of how the US Govt. determines if we officially "live outside the USA". In the simplest case, to qualify for the ACA Foreign exclusion:
~ We must be outside of the the USA for 330 days in a calendar year to qualify.
~ We must qualify under IRS requirements to be a "bona fide 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. ”
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, 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.
If you are a US citizen and a Resident, without a medical coverage plan, then you will have to pay the following "Taxes" 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 $95 each.
~ 2015 TY: Families: $975 per family or 2 percent of income, whichever is greater. Individual adults pay $325 each.
~ 2016 TY: Families––$2,085 or 2.5 percent of income, whichever is greater. Individual adults––$695.
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.**
About Dr. Fry/Yucalandia.com
Dr. Fry has been coming to Mexico since 1985, and moved here with his Yucatecan wife in 2006. At that time there was very little information on the web with accurate technical details about moving to Mexico. After slogging through lot’s of conflicting information on the web and resolving the conflicts by reading the regulations in the original Government Spanish just to find a few gems of reliable information, Dr. Fry decided to pay it forward by gathering together the best bits that fit his family’s move here.
Also of interest from Yucalandia.com: Basic Information on Americans Living Abroad and ACA Obamacare