International Expatriate Coverage and ACA – What Expats Encounter

by Brendan Sharkey

The growth in globalization is indisputable. With it, comes the need for American companies to send employees around the world. According to the State Dept., 4 million to 6 million Americans live outside the United States. This brings up critical questions about ACA eligibility and the individual mandate.

Many U.S. expatriates are covered under employer-sponsored plans, which have been given special consideration under the ACA. But many others don’t qualify for group benefits. Instead, they must look to the individual expat marketplace. This puts a sizeable population of Americans in a real conundrum.

No international expatriate plans in the individual market automatically meet the definition of minimum essential coverage (MEC). If there is a silver lining, it’s that U.S. citizens who are outside the states for 330 days or more in a 12-month period are not required to maintain MEC. This population is deemed to have met the individual mandate. However, a large number of expatriates don’t meet that exact 330-day threshold and are likely to be subject to tax penalties. They face the prospect of paying the shared responsibility payment if they select an expatriate health insurance plan that covers them comprehensively at home and abroad. Ironically, the intent of the law was to ensure that people have substantial coverage. Since many expatriate workers are high income wage earners, the penalty in 2015 is likely to be 2% of income above the filing threshold (subject to the cap). It represents a surcharge based solely on lifestyle.

Purchasing a standard U.S. health plan puts expatriates in peril. Most U.S. domestic health plans don’t have credentialed international provider networks, and don’t provide coverage for non-emergency care outside the U.S. As a result, these domestic plans will never provide meaningful protection for expatriates living abroad. Essential health benefits, such as preventive care, vanish when international boundaries are crossed.

Even a high-end Platinum level plan, purchased on an exchange, resembles catastrophic coverage when you try to use the coverage in China or the United Kingdom. Traditional domestic coverage, which provides limited benefits, can expose American’s living abroad to unnecessary medical risk and substantial additional out-of-pocket expenses. Enrollment in a healthcare exchange requires that the insured be lawfully present in the United States. The law did not fully consider residency status for Americans who live overseas. At the same time, these people are financially punished if they spend more than 35 days visiting their homeland. Many unintended consequences seem to emerge because the law was built to cover Americans in America.

An alternative is for the expat is to buy a domestic health plan for coverage stateside and an international policy for coverage outside the United States. This approach offers adequate coverage and services. Keep in mind that this approach comes at an additional premium cost, and can mean paying two out-of-pocket maximums. The ultimate decision about what an expat buys comes down to examining their travel itinerary and crunching all the numbers.

Here is a short list of FAQs to help you and your clients understand the basics of expat coverage and ACA:

1. Are U.S. citizens living outside the U.S. affected by the ACA? You are exempt from ACA rules if you live outside the U.S. for 330 days or more per calendar year. You meet ACA requirements if you are covered by an expatriate group plan purchased in the U.S. by your employer. Certain rules apply if you don’t fall into either of these categories. (See below).

2. Are non-U.S. citizens living inside the U.S. affected by the ACA? ACA rules apply if you are a permanent legal resident (Green Card holder) or a resident alien as defined by the IRS. Foreign Nationals who are here for study, vocation, or teaching are typically exempted from IRS tax penalties.

3. Does travel outside the U.S. affect a U.S. resident’s obligations under the ACA? No, short-term travel outside the U.S. has no bearing on a U.S. resident’s obligations under the ACA.

4. Are non-U.S. citizens traveling inside the U.S. affected by the ACA? No, unless you are a permanent legal resident or a resident alien, you are typically exempt from ACA requirements.

5. What ACA rules apply? If you are subject to ACA rules, you are expected to meet the Individual Mandate each calendar year, or you will be subject to tax penalties when you file your Federal tax return.

6. Do plans that meet the Individual Mandate function well outside the U.S.? Plans that are available through https://www.healthcare.gov, online exchanges operated by certain states, as well as websites operated by health insurers and health insurance brokers, are not designed for care outside the U.S. So they expose the policy holder to significant financial risk. Patients outside the U.S. bear substantial costs of medical emergencies, preventive care, or routine illnesses when they purchase a plan that meets the Individual Mandate.

Should customers purchase an expat plan and a domestic health plan? It depends on a number of factors, such as your income level, travel itinerary, and your choice of health plan. Some expatriates buy a bronze plan for U.S. coverage and supplement it with an overseas expat policy. Others buy an expat policy with overseas and U.S. coverage combined.

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Brendan Sharkey is the director of Individual Products for GeoBlue. From the nuts and bolts of international health insurance to the crucial themes of global health and safety, He’s frequently called upon to discuss global insurance. His contributions include CNBC “Squawk Box”, WGN AM Talk Radio, Forbes, The Wall Street Journal, NY Times, USA Today, LA Times, among others. To contact him email bsharkey@geo-blue.com.

Overseas Treatment– Scenarios for U.S. Expatriates

The following medical scenarios illustrate how one particular expatriate medical coverage plan functions overseas compared to a standard U.S. domestic health insurance plan:

Preventive care, a colonoscopy, for 50-year old at Beijing United Hospital:
• Colonoscopy charge: $3,200
• Anesthesia charge: $400
•  Total: $3,600

The member would have no out-of-pocket expense under the expatriate medical coverage plan. But the out-of-pocket expense would be $3,600 under a domestic Platinum plan. U.S. domestic health plans don’t generally cover preventive screenings overseas.

Outpatient treatment for routine sickness, strep throat, at Harley Street Clinic in London:
• Office consult charge: $255
• Office laboratory charge: $65
• Antibiotic prescription charge: $15
• Total: $335

The expatriate medical coverage plan would have an out-of-pocket cost of only $10. That $10 copay is waived when you schedule the visit through the 24/7 assistance center. In contrast, the member’s out-of-pocket expense with the domestic Bronze plan would be $335. U.S. domestic health plans don’t usually cover routine sickness, lab fees, and prescriptions overseas.