How Expats can qualify for exemption from Obamacare

[Winston]

Since none of you guys were able to tell me how Obamacare applies to Expats, and ignored my questions, I went ahead and did the tedious research myself.

Here is how expats can qualify for exemption from paying for Obamacare, aka the Affordable Care Act, provided they meet certain criteria.

https://www.healthcare.gov/exemptions/
http://www.ticotimes.net/2013/11/23/wha ... -obamacare
http://www.expatexchange.com/article/42 ... xes-Abroad
http://internationalliving.com/2013/11/ ... ns-expats/
http://blogs.wsj.com/washwire/2013/10/0 ... w-mandate/

From the IRS:

http://www.irs.gov/uac/Questions-and-An ... -Provision

12. Are US citizens living abroad subject to the individual shared responsibility provision?
Yes. However, U.S. citizens who are not physically present in the United States for at least 330 full days within a 12-month period are treated as having minimum essential coverage for that 12-month period. In addition, U.S. citizens who are bona fide residents of a foreign country (or countries) for an entire taxable year are treated as having minimum essential coverage for that year. In general, these are individuals who qualify for a foreign earned income exclusion under section 911 of the Internal Revenue Code. Individuals may qualify for this rule even if they cannot use the exclusion for all of their foreign earned income because, for example, they are employees of the United States. Individuals that qualify for this rule need take no further action to comply with the individual shared responsibility provision during the months when they qualify. See Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, for further information on the foreign earned income exclusion.

U.S. citizens who meet neither the physical presence nor residency requirements will need to maintain minimum essential coverage, qualify for an exemption or make a shared responsibility payment for each month of the year. For this purpose, minimum essential coverage includes a group health plan provided by an overseas employer. One exemption that may be particularly relevant to U.S. citizens living abroad for a small part of a year is the exemption for a short coverage gap. This exemption provides that no shared responsibility payment will be due for a once-per-year gap in coverage that lasts less than three months.

IRS Tax Guide for US Citizens and Resident Aliens Abroad
http://www.irs.gov/pub/irs-pdf/p54.pdf

How do they know how long you've been out of the US though? Do they go by your exit dates on your passport?

[Rock]

Since none of you guys were able to tell me how Obamacare applies to Expats, and ignored my questions, I went ahead and did the tedious research myself.

Here is how expats can qualify for exemption from paying for Obamacare, aka the Affordable Care Act, provided they meet certain criteria.

https://www.healthcare.gov/exemptions/
http://www.ticotimes.net/2013/11/23/wha ... -obamacare
http://www.expatexchange.com/article/42 ... xes-Abroad
http://internationalliving.com/2013/11/ ... ns-expats/
http://blogs.wsj.com/washwire/2013/10/0 ... w-mandate/

From the IRS:

http://www.irs.gov/uac/Questions-and-An ... -Provision

12. Are US citizens living abroad subject to the individual shared responsibility provision?
Yes. However, U.S. citizens who are not physically present in the United States for at least 330 full days within a 12-month period are treated as having minimum essential coverage for that 12-month period. In addition, U.S. citizens who are bona fide residents of a foreign country (or countries) for an entire taxable year are treated as having minimum essential coverage for that year. In general, these are individuals who qualify for a foreign earned income exclusion under section 911 of the Internal Revenue Code. Individuals may qualify for this rule even if they cannot use the exclusion for all of their foreign earned income because, for example, they are employees of the United States. Individuals that qualify for this rule need take no further action to comply with the individual shared responsibility provision during the months when they qualify. See Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, for further information on the foreign earned income exclusion.

U.S. citizens who meet neither the physical presence nor residency requirements will need to maintain minimum essential coverage, qualify for an exemption or make a shared responsibility payment for each month of the year. For this purpose, minimum essential coverage includes a group health plan provided by an overseas employer. One exemption that may be particularly relevant to U.S. citizens living abroad for a small part of a year is the exemption for a short coverage gap. This exemption provides that no shared responsibility payment will be due for a once-per-year gap in coverage that lasts less than three months.

IRS Tax Guide for US Citizens and Resident Aliens Abroad
http://www.irs.gov/pub/irs-pdf/p54.pdf

How do they know how long you've been out of the US though? Do they go by your exit dates on your passport?

The US does not seem to have a streamlined system for monitoring this, YET. Perhaps in a few years.

[zboy1]

So, even if you are overseas, you have to have insurance under Obamacare? GTFO!

Damnnn USA!.........

[Winston]

So, even if you are overseas, you have to have insurance under Obamacare? GTFO!

Damnnn USA!.........

Not if you are overseas for 330 days of the year. Otherwise, you have to pay either 1 percent of your income or $95, whichever is higher. Their reasoning is that everyone should pay their share so that everyone in the US can be covered.

What about those who are already covered though?

[Rock]

So, even if you are overseas, you have to have insurance under Obamacare? GTFO!

Damnnn USA!.........

Not if you are overseas for 330 days of the year. Otherwise, you have to pay either 1 percent of your income or $95, whichever is higher. Their reasoning is that everyone should pay their share so that everyone in the US can be covered.

What about those who are already covered though?

I believe there are at least 2 ways to for a US person to qualify for exemption:

1. 330 days physically out of USA

2. Qualify as bona-fide resident of foreign country (even if you have spent more than 30 days of tax year physically present in USA. I fit this category for 2013 tax year and I believe Winston may too.

U.S. citizens who are not physically present in the United States for at least 330 full days within a 12-month period are treated as having minimum essential coverage for that 12-month period. In addition, U.S. citizens who are bona fide residents of a foreign country (or countries) for an entire taxable year are treated as having minimum essential coverage for that year. In general, these are individuals who qualify for a foreign earned income exclusion under section 911 of the Internal Revenue Code.


http://www.irs.gov/Individuals/Internat ... dence-Test

By the way, Taiwan's National Health Insurance does cover us abroad but only for very modest (read negligible amounts, in line with what health care costs in Taiwan). For example, for one emergency room visit in USA, I think you can claim back around NT$5,000 in reimbursements within six months with relevant receipts. That's like US$160 lol. But a visit to a US emergency facility will likely run you a few thousand US$.

[MrPeabody]

The thing I don't understand is do they require any verification or a statement. What do you exactly have to file to verify you don't live in the US?

[MatureDJ]

I know something about this as I live abroad for most of the year and actually am enrolled in ObamaCare.

I live in a state that did not do the Medicaid expansion, and my latest documented income - i.e., that as per the latest tax form - is less than the 100% of poverty, but as any applicant is able to propose his income as being higher than what the most applicable documented income is, I was able to get the subsidy for someone with an income exactly at 100% of poverty to purchase an exchange plan. (Also, if someone were to propose an income of at least 100% of poverty, but then end up having an income less than that, he would not be subject to having to pay that subsidy back.) The subsidy is set so as to make the maximum net premium (i.e., the actual premium minus the subsidy) for the 2nd lowest cost Silver plan that the applicant pays be a certain coefficient of income, with that coefficient being a function of the poverty income factor of that income (i.e., the ratio of income to poverty income) - and with this coefficient starting out at 2% and going up to 9.5%.

This subsidy is what the applicant gets, no matter what plan he purchases, and could completely cover the cost of a plan if it simply costs less than that subsidy amount (and there would always be a cheaper plan, both in the form of the lowest cost Silver plan, and the lower level "metal" plans such as Bronze, the proposed "Copper" and for folks under 30, a catastrophic plan). The point is that if someone were living as a low income expat, he would be getting some type of subsidy, and thus could simply buy a cheaper plan, and not have to worry about anything, including being covered up to some degree if he were to need medical attention while back in the USA. (As for me, the lowest cost Silver plan is so much lower than the 2nd lowest cost plan that my subsidy completely paid for the plan!)

And of course, if someone lives in a Medicaid expansion state, he could get Medicaid if his income were low enough.

Now, for folks whose income is a bit higher and don't get much of or any subsidy, then there is an issue about paying for coverage while abroad. (NOTE: While someone has pointed out that the USA does not have a proper out-migration passport check, there are the easily documented airline flights that could be accessed, if the exchange or the IRS decided to investigate.) It would seem to me that an individual could decide at the time of his departure from the applicable USA (which seems to be the 50 states & DC, but not the other parts of US territory) that he is beginning a 365+ day period with less than 30 days inside the applicable USA - and would not be subject to the IRS penalty so long as he would not break that rule (i.e., he would break it upon day 31 in any 365 day period).

However, what is probably more important to such a USA citizen/resident is that he *should* get coverage when he actually is back in the applicable USA. For example, I have been averaging about 3 months a year back in the USA (all in one stay), so I should get coverage while I am there - to say nothing of the possibility that some serious medical condition pops up while away, needing attention when returning. Now, the issue here is that outside of a "life change" event, coverage can only start on the 1st of Jan, Feb or Mar, so for example, coming back in August would result in not even being able to buy coverage until Jan. Now moving from residing abroad to residing back in the applicable USA would qualify as a "life change" event, so someone could plausibly say that he went abroad with the intent to stay abroad for the 365 minus 30 days - even if it ended up getting cut short (although repeatedly doing so such that there would not be the minimum 335 days could raise some red flags) - and sign up for coverage at any time of the year (with the actual start date being the 1st of whatever month).

Again, as for me, my income was low enough so that my plan is free, so it didn't matter. And as I get a steady supply of various medications, I get a certain value out of my plan, so even if I were to not use any services out side of the medication, so long as my net cost were not more than my cost of the plan, it makes sense for me to just buy a plan (and of course, as my plan costs me $0, it would make sense even if I didn't use it at all!)

[Winston]

I believe there are at least 2 ways to for a US person to qualify for exemption:

1. 330 days physically out of USA

2. Qualify as bona-fide resident of foreign country (even if you have spent more than 30 days of tax year physically present in USA. I fit this category for 2013 tax year and I believe Winston may too.

U.S. citizens who are not physically present in the United States for at least 330 full days within a 12-month period are treated as having minimum essential coverage for that 12-month period. In addition, U.S. citizens who are bona fide residents of a foreign country (or countries) for an entire taxable year are treated as having minimum essential coverage for that year. In general, these are individuals who qualify for a foreign earned income exclusion under section 911 of the Internal Revenue Code.


http://www.irs.gov/Individuals/Internat ... dence-Test

By the way, Taiwan's National Health Insurance does cover us abroad but only for very modest (read negligible amounts, in line with what health care costs in Taiwan). For example, for one emergency room visit in USA, I think you can claim back around NT$5,000 in reimbursements within six months with relevant receipts. That's like US$160 lol. But a visit to a US emergency facility will likely run you a few thousand US$.

That's great to know. But what qualifies as a "bona fide resident of a foreign country" exactly?

And what is a "foreign earned income exclusion"? Doesn't that mean that you have to be earning income from a foreign employer? It sounds like it from here:
http://www.irs.gov/Individuals/Internat ... quirements

These laws are confusing and boring too. Rock, maybe you can find us both a tax consultant in Taiwan that deals with US expats?

[Jester]

I believe there are at least 2 ways to for a US person to qualify for exemption:

1. 330 days physically out of USA

2. Qualify as bona-fide resident of foreign country (even if you have spent more than 30 days of tax year physically present in USA. I fit this category for 2013 tax year and I believe Winston may too.

U.S. citizens who are not physically present in the United States for at least 330 full days within a 12-month period are treated as having minimum essential coverage for that 12-month period. In addition, U.S. citizens who are bona fide residents of a foreign country (or countries) for an entire taxable year are treated as having minimum essential coverage for that year. In general, these are individuals who qualify for a foreign earned income exclusion under section 911 of the Internal Revenue Code.


http://www.irs.gov/Individuals/Internat ... dence-Test

By the way, Taiwan's National Health Insurance does cover us abroad but only for very modest (read negligible amounts, in line with what health care costs in Taiwan). For example, for one emergency room visit in USA, I think you can claim back around NT$5,000 in reimbursements within six months with relevant receipts. That's like US$160 lol. But a visit to a US emergency facility will likely run you a few thousand US$.

That's great to know. But what qualifies as a "bona fide resident of a foreign country" exactly?

And what is a "foreign earned income exclusion"? Doesn't that mean that you have to be earning income from a foreign employer? It sounds like it from here:
http://www.irs.gov/Individuals/Internat ... quirements

These laws are confusing and boring too. Rock, maybe you can find us both a tax consultant in Taiwan that deals with US expats?

Resident of foreign country could be either filing a tax return there, or having legal residency there. It MIGHT also be possible to establish without those, if you bought a business or established a home and lived there. But don't count on it. Legal residency or filing a tax return are safe havens.

FEI exemption does not require bona fide residency. Bona fide residency gives you FEI, but just staying outside the US 11 months a year ALSO does.

[Jester]

Now, for folks whose income is a bit higher and don't get much of or any subsidy, then there is an issue about paying for coverage while abroad. (NOTE: While someone has pointed out that the USA does not have a proper out-migration passport check, there are the easily documented airline flights that could be accessed, if the exchange or the IRS decided to investigate.)

Your airline flights are easily checked by the IRS. They could just require YOU to show them.

However you usually do NOT get checked when driving to Mexico, if that helps. The IRS has no way of knowing when you leave...

...although if the FBI was after you, or the IRS actually subpoena'd your bank records, they could check your whereabouts via ATM withdrawals, etc. You would have to be a big fish for that to happen.

Obviously the IRS would know when you RETURN to the States, from anywhere. But if returning by car or on foot from Mexico, they don't know how long you were away.

For now.

Simplest thing is just get the hell out.