How Does U.S. Healthcare Reform Affect Expatriates?

With the United States’ healthcare reform act, known as Patient Protection and Affordable Care Act (PPACA), soon to take effect, many expatriates residing outside of the US and living the nomadic lifestyle are wondering how the new laws will impact their lives.

Starting January 1, 2014, anyone who has the means must purchase health care insurance or face a penalty.

Companies that employee 50 or more people will have to offer an insurance plan. Any individual who receives insurance through their employer and pays over 9.5% of their salary in premiums can choose to buy optional state-run health insurance. This is also offered to people whose insurance covers less than 60% of the cost.

There are provisions made for those who do not earn more than 400 percent of the set poverty level, face financial hardships or based on religious beliefs.

For those expatriated who live abroad, the mandate for obtaining United States-based health insurance plans does not apply to you if you live outside of the US for more than 330 days out of the year. Instead, the IRS new tax code will treat expatriates as though they maintain the minimum required health coverage.

To qualify, you must be eligible for the foreign earned income exclusion. This exclusion lets US expatriates skip paying taxes on up to $91,500 of their income. You will still have to pay taxes on any income that exceeds this level. This includes the Medicare tax, which the new bill has also mandated an increase of one-half of one percent for anyone earning more than $200,000 as an individual or $250,000 jointly.

That means the percentage you will be paying for Medicare will increase from 2.9% to 3.4% of annual income. The Medicare tax has no cap, so no matter your income, you have to pay it.

There is a chance that the insurance coverage you purchase in the country of your residence will not be of use when you travel to the United States, so you might want to look into purchasing additional supplemental coverage anytime you are planning a trip back to the US so that you know you are covered for any emergencies or health issues on your travels.

If you are living the life of a nomadic traveler, it is important to purchase holiday insurance that is recognized as a credible coverage in the United States in order to meet the requirements of having insurance and avoid the penalty.

There are many providers that offer international health insurance plans that will cover you wherever you travel as well as back in the United States. Companies include HTH, Cigna and Blue Cross, as well as many others.

Be sure that you are purchasing a plan that gives you full coverage while you are abroad instead of just a travel insurance plan that only covers emergency visits to the hospital. But note that hese plans will not be effective once you set foot back in America so they will not be viewed as credible health coverage.

Image Credit: Red Cross - Wikimedia Commons

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