Wednesday, June 7th 2017

Obamacare and the Expat: What are you paying for?

Written by

Rafael Bracho

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Expats and Obamacare ACA

Did you know that living abroad allows Expats to opt out of the Affordable Care Act (ACA) Plans—also known as Obamacare)? Are you still paying outrageous American health insurance premiums for coverage that might not even reach to where you are living abroad? We speak weekly to people paying thousands of dollars a month for their ACA plans with deductibles as high as $6,000 or $7,000 USD. When we ask why, a lot of the answers are, “We thought we had to” or, “We want the option to have care in the United States”. Regardless of your political view of what is happening with Obamacare in the US, as of now it is still the law of the land and it affects you.

The good news is that if you’re an Expat, you may qualify for an exclusion to the rule for “living abroad”, and avoid the penalties of not having coverage under the ACA requirements. Save your budget from the ever increasing premiums the ACA policies are experiencing in the US, even while obtaining coverage within the United States of America.

What qualifies one for this exclusion?

They’re the same guidelines as those who qualify for the Foreign Earned Income Exclusion. This exclusion allows taxpayers to avoid paying federal taxes if they have earned an income while living abroad.

Two definitions can be utilized to determine your Expat status:

  • The first is if you’re living abroad 330 out of 365days each year.

  • The second is called the Bona Fide Residency Test. The Residency test is for those that live abroad for an extended period of time and sever ties to the US.

A lot of technicalities are involved to determine what makes the most sense for individuals, and which test to use. Be sure to consult with your tax advisor to make the right decision for your specific situation. We find that those who explore these options with their tax advisor find that they qualify for an exclusion and are able to opt out of participating in an ACA (Obamacare) plan.

One common mistake is not filing for the health care exclusion once a decision has been reached. There’s a specific form called IRS Form 8965 that needs to be filed annually. Ignore filing the exclusion form with your annual taxes, and at some point you will get a, “Dear Taxpayer” letter from the IRS requesting an explanation of why you do not have coverage, and could possibly face a penalty. Once again, review this with your tax advisor for your specific situation.

Many Expats end up keeping their ACA (Obamacare) coverage out of fear of not being able to utilize health care in the United States in the event of a major health issue, or generally not having access to American care. While many people agree that care in some parts of the world equals, or even surpasses care in the United States, many expats want the option to utilize that latest cancer treatments, orthopedic procedures, or specialized care that might only be available in the United States or Canada.

This can be solved by opting to add American coverage to an International Health Care policy. This is available to Expats that live at least 6 out of 12 months or more outside their home (or passport) country. Be aware these policies do not cover preexisting health conditions, and do require full underwriting. Nor do they provide the rich wellness benefits the ACA plans provide in the US, but you’re likely to see annual premiums 50% – 75% less than what you pay in the United States, with lower deductibles and health care that is not restricted to specific states or providers. The policies also offer incentives to have the care provided outside the US if necessary. If American care is not necessary to you, you end up saving even more while being fully covered in your country of choice.

Interested in getting health insurance while living abroad? Get a free quote today by clicking below.

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