Calling yourself an expatriate does not necessarily mean you renounce or reject your home country. An expatriate is any person living in a different country from where they were born as a citizen. Recently, the term “expat” is used in the context of professionals working abroad such as oil workers, missionaries and retirees living abroad.
Living internationally raises a lot of questions for U.S. citizens in regards to PPACA Patient Protection and Affordable Care Act, ( or Obamacare) and IRS laws. The first thing you need to determine is whether or not you qualify as an expatriate.
Are You an Expatriate?
In the new IRS tax code, expatriates are treated as if they have health insurance regardless of whether they do or not. This is because although it is not a law for you to purchase health insurance in a foreign country, the government assumes you will purchase it for your own safety.
In order to meet the criteria for the exclusion that allows U.S. expats to avoid paying U.S. taxes on their first $97,600.00 worth of U.S. income ( you may qualify to exclude from income up to an amount of your foreign earnings that is adjusted annually for inflation ($91,500 for 2010, $92,900 for 2011, $95,100 for 2012, and $97,600 for 2013), the expatriate must have a tax home in a foreign country, as well as be either a legitimate resident in that country (Mexico’s Resident Temporal or Resident Permanente) or spend at least 330 days a year outside the United States.
A stamped passport would verify your time outside the U.S. whether or not you own a home in your new country.
The US does tax citizens on income earned abroad, as evident in the listing of international taxation. International taxation is the determination of tax on a person subject to the tax laws of that country’s laws even when those citizens are taxed by their countries of residence.
However, as stated above, US citizens are allowed to exclude their first $97,600.
Additionally, a 2010 US law known as FATCA requires expatriates to report any foreign bank accounts exceeding $50,000, with heavy fines for noncompliance.
We recommend getting a tax accountant that is familiar with international tax laws. Ask your U.S. accountant if they are comfortable continuing to handle your taxes with your move to Mexico, and if they are not, see if they can recommend one to you. Depending upon the community you move to, you may be able to get a local referral.
What if I am Considered an Expatriate?
If you are considered an “expatriate” via your IRS filing, you do not need to worry about finding a qualified domestic carrier through an approved PPACA state Exchange or broker.
Further exemptions include:
- Individuals not residing in the U.S. 330 days of the year or who have valid resident visa’s.
- Non-U.S. citizens who are “non-resident aliens” (for U.S. income tax purposes qualify for an international major medical policy).
- Individuals with a coverage gap of less than 3 months.
- Individuals who cannot afford coverage (i.e. required contribution exceeds 8% of household income).
- Individuals with a religious conscience exemption (applies only to certain faiths).
- Members of a health care sharing ministry.
- Incarcerated individuals.
- Individuals with income below the tax filing threshold; and
- Members of Indian tribes.
What If I Don’t Quite Qualify as an Expatriate?
If you need to have health insurance in the U.S. to avoid the tax penalty and coverage internationally to protect yourself and your family while living abroad, you will need to purchase 2 policies. International policies are surplus line insurance plans and do not meet the PPACA qualified carrier specifications and PPACA policies do not offer coverage outside the U.S. There is no way around this issue.
How Do I Get My PPACA Domestic Coverage?
If you are a person that does not quite fall into the “expatriate” category, such as maybe an oil field worker or consultant, who works and lives abroad less than 330 days per year, than you are going to need to purchase a domestic health care policy that is PPACA approved through a state Exchange or an independent broker.
To get started with your U.S. PPACA insurance plan, go to Healthcare.gov. To purchase your international major medical policy, please visit us at American Insurance for Expats, and get your quote today.
How Do I Find International Coverage?
Just as international policies will not meet the minimum carrier specifications for PPACA, domestic health care plans will not cover you once you cross the border. When you purchase an international health care policy, you are purchasing it to protect yourself and your family in a foreign country, not to meet PPACA requirements.
To reduce your costs, you can purchase a private, major medical, international policy that excludes coverage in the U.S. so you are not over-insured.
If you qualify as an expatriate, you can purchase a “Worldwide” policy that offers major medical coverage in the U.S. and every other country you live, work or travel to and not worry that it meets the PPACA requirements. These international major medical policies are perfect for people who work, study or live full time in a foreign country.
Common Questions About International Health Insurance
Q. Is my international insurance plan considered “health insurance coverage” under PPACA?
A. No. Under PPACA, the term “health insurance coverage” means insurance benefits offered by a “health insurance issuer,” which is an insurance company that is licensed to engage in the business of insurance in a State of the U.S. and which is subject to State law that regulates insurance.
IMG’s international major medical plans are underwritten by Sirius International Insurance Corporation, a Swedish insurance company, for persons that are not eligible for or required to purchase a PPACA plan. If you are now eligible for or required to purchase a PPACA plan and the PPACA plan application asks you whether you currently have “health insurance coverage,” you should answer that question “No.” if you have an international major medical policy with IMG.
Q. I am a U.S. citizen that will be temporarily traveling outside of the U.S. Do I need PPACA coverage for this?
A. IMG’s short-term international travel medical products are not a substitute for minimum essential coverage that you may need to have under PPACA. However, since most PPACA plans do not provide the types of international benefits and assistance that travelers need, you should strongly consider purchasing an international travel medical plan such as IMG’s Travel Medical Insurance for coverage while you travel outside of the U.S.
Q. What will my tax be if I am required to have PPACA coverage, but do not purchase it?
A. Taxes begin in 2014 and rise in years following. In each year, the tax consists of the higher of a dollar amount or a percentage of household income. For a given household, the tax applies to each individual, up to a maximum of three. Following is the schedule of taxes:
2014: The higher of $95 per person (up to 3 people, or $285) OR 1.0% of taxable income.
2015: The higher of $325 per person (up to 3 people, or $975) OR 2.0% of taxable income.
2016: The higher of $695 per person (up to 3 people, or $2,085) OR 2.5% of taxable income.
After 2016: The same as 2016, but adjusted annually for cost-of-living increases.
What If I am on Medicare?
Medicare is PPACA approved insurance and we always encourage you to maintain your U.S. issued Medicare coverage no matter how many months of the year you live internationally. If you are ever diagnosed with something that can not be treated in the country you are residing in, you will want the long term domestic care coverage Medicare provides.
However, Medicare will only cover you outside the U.S. up to 60 days, with a maximum benefit of $50,000.00. After 60 days, or the $50,000.00 has been met, which ever comes first, you are uncovered. This is why we encourage you to purchase an international health care policy as well as maintain your Medicare coverage.
Talk to an agent to discuss how you can have health insurance internationally and stay within your budget.
Need Help With Finding a Better Medicare Policy?
If you want to find out if you have the best Medicare policy available to you, please visit Broker’s Assistance. We can work together to get you the best domestic and international policy to fit within your budget.