Dateline: Tartu, Estonia
As a perpetual traveler, medical insurance can be a touchy subject.
Sure, it’s easy to obtain health insurance as an expat, or even someone with no permanent address as is my case. If you still maintain citizenship in your home country, it’s relatively easy to get a “permanent address” there and sign up for coverage.
The touchy part, especially for younger expats living overseas, is the cost of health insurance in countries like The Land of the Free. If you’re living abroad, you may wonder if you even need to maintain that coverage to begin with.
Over the last few days, my inbox has been filling up with emails reminding me not to miss the Obamacare enrollment deadline coming up next week. How they got my name, I don’t know. After all, I don’t intend to set foot in any doctors’ offices or hospitals in the United States any time soon.
Nevertheless, I have maintained an American health insurance policy for some time as an extra measure of security. I do occasionally spend time in the United States; and the cost of roughly $100 a month seemed reasonable for the additional layer of safety in case I got hit by a bus.
However, as an American living abroad, I knew that the advent of Obamacare would put an end to these cheap health insurance premiums once and for all.
And, sure enough, when I got my insurance renewal notice it came in at $195 a month. A friend of mine in the insurance field suggested it would likely go up even more once the policies were finalized.
Take into account that, last year, I got about a dozen medications, a dedicated nurse, and a visit with a UK-trained physician to treat a bad case of tonsillitis for all of $133 in Malaysia… at what was voted to be the best hospital for medical tourism on planet earth.
The same went for an all-out physical I had in Thailand the month before, which barely cost $100.
With prices like those for top-quality care, you’d wonder why any expat living overseas would want to even bother maintaining an American insurance policy. The issue in the freedom-less zone that is the United States is, of course, Obamacare.
Why would any expat want Obamacare?
Of course, the whole idea of Obamacare is a canard. Under the catchy name of the Patient Protection and Affordable Care Act, all Americans are now required to purchase health insurance. Those that don’t will be forced to pay a tax on a product they never wanted, but that is mandated by the government.
Policies must meet some bureaucratic standard for “minimum essential coverage”. Just the idea of handing a bunch of politicians and unelected administrative officials such a lofty responsibility is akin to handing your six-year old the keys to a Porsche.
Why would an expat want to pay for a policy, the price of which is not determined by any free market, when health care costs in the United States are the highest in the world to begin with? I could get a 104-degree fever and enlarged tonsils every month for less than the cost of a mediocre insurance policy back “home”.
Do Americans living abroad have to maintain coverage for Obamacare?
The IRS is responsible for administering the fines — I mean “taxes” — on those who don’t comply with Obama’s health insurance mandate. Imagine that, a tax agency enforcing health insurance. It’s brilliant. For those who don’t meet the test for maintaining “minimum essential coverage”, the tax due is $95 each year, or 1% of your income, whichever is greater. The minimum fine will rise to $695 — and more for families — in two years.
You do not have to maintain an Obamacare-approved policy if:
1. You qualify for the Foreign Earned Income Exclusion based on being outside of the United States at least 330 days in a year. For tax purposes, you can adjust the FEIE to fit any schedule you choose; for example, if you were in the US for the first forty days of calendar year 2013, but haven’t returned since, you could use the 330 days starting February 10, 2013 as your qualifying period.
Whether this same non-calendar year standard applies to Obamacare is something I haven’t determined yet. The law is vague, perhaps intentionally, and the IRS hasn’t issued rulings on all of it yet.
– OR –
2. You maintain a “bona fide residence” in another country and have no plans to return to the US permanently. There is a whole IRS form that helps you determine just how “bona fide” your residence is, but ultimately any auditor can pierce your claim. Bona fide residence is much harder to prove than the physical presence test because it’s somewhat subjective.
However, if you maintain a non-resident visa (such as Mexico’s FM-3 visa) and do not pay income tax overseas, your bona fide requirement will likely not be satisfied.
– OR –
3. You are housed in a US prison where health care is provided for you.
Anything else and you’re likely subject to the Obamacare mandate. Please note, I am not an accountant, so check with your own accountant before deciding the best course of action to take.
Remember, even if you don’t have to maintain coverage under Obamacare, you are liable to pay the extra 3.8% tax on investment income and income over the “high income earner” threshold. If you live outside the United States, you can avoid having that high income in most cases by using an offshore corporation.
Whether you’re required to sign up for coverage under Obamacare or not, the reality is that the IRS is employing 16,000 new agents to track down people who don’t comply with a silly law. That includes stationing IRS agents in more and more foreign countries to keep an eye on the traitors who live outside the prison camp borders.