The ‘Patient Protection and Affordable Care Act’ (PPACA / ACA) was implemented to address the constantly increasing cost of medical care in the USA and the significant portion of the American population with no medical insurance.
Why was PPACA / ACA implemented?
At the heart of the reform are three key principles: guaranteed cover, uniform rates and the concept of the ‘individual mandate’ (also known as the Individual Shared Responsibility Provision).
The individual mandate ensures that all permanent residents in the USA have a minimum level of health insurance (Minimum Essential Coverage, known as MEC).
What are the conditions required for health insurance that is ‘MEC’?
With the exception of the cases mentioned above, the ‘Patient Protection and Affordable Care Act’ rules apply to all other individuals considered to be “permanent legal residents” and Green Card holders or “resident aliens” as defined by the IRS (Internal Revenue Service).
People travelling to the US on a temporary basis (and who are therefore not permanent legal residents) do not have to have health insurance that is ‘MEC’. US nationals residing outside the US for over 330 days in a 12 month period are treated as having ‘MEC’.
Like most international health insurance products, MSH products are not considered as ‘MEC’ and do not meet the requirements of the PPACA regarding the Individual Mandate, but you can still purchase them when you are moving to the US.
Who are exempted from the obligation to subscribe to MEC health insurance?
Two different categories of people do not have to subscribe to MEC health insurance:
Foreign nationals resident in the US:
- Foreign nationals not considered to be permanent legal residents in the US (based on the criteria for a Green Card) or who have spent less than 183 days in the US over the last three years;
- Foreign nationals present in the US on a temporary basis: teachers or trainees with a visa type ‘J’ or ‘Q’; students with a visa type ‘F’, ‘J’, ‘M’ or ‘Q’ and professional athletes taking part in a sports event for charity
- Expatriate employees (and their dependents) who have been residing outside their home country for at least 6 months of the plan's year, covered under an insured group health plan via their employer which is regulated by a foreign government (other than the USA). Their cover is considered "MEC".
- Individuals required to have health insurance that is MEC, but who failed to have such cover for a maximum period of three months in the last year (only one such period of three months is allowed per year).
- US nationals residing outside the US for over 330 days in a 12 months period or who are bona fide residents of a foreign country for an entire tax year (US citizens living abroad are subject to the individual shared responsibility, however in certain circumstances, they are treated as having MEC);
- US nationals with a gap in cover of less than three months;
- US nationals who cannot afford cover (where the minimum premium payable is over 8% of their household income);
- US nationals belonging to religious sects (only valid for certain sects);
- US nationals who are members of a ‘health care sharing ministry’ (an organization that spreads the cost of healthcare across its members, who all share the same moral or religious beliefs);
- US nationals who are in jail, prison or a similar penal institution;
- US nationals whose income is below the minimum threshold for filing a tax return
- US nationals who are members of Indian tribes.
Is there any sanction for not having health insurance in line with the Obamacare regulation?
No, there is no sanction. The Tax Cuts and Jobs Act of December 22, 2017 eliminates the financial penalties as of January 1, 2019 for individuals who do not have health coverage. The 'Individual shared responsiblity payment' disappears.
From 2020, when individuals taxable in the US will file their income tax return, they will automatically be exempted from having to pay a tax to the IRS.
However, some federal states may continue to impose taxes. It is essential to note that if the product you had in 2018 did not comply with the provisions of the 'Patient Protection and Affordable Care Act', you will still be subject to the payment of a federal tax in 2019.
Do health insurance products that meet the requirements of the Individual Mandate provide an adequate level of cover outside the US?
Health insurance products available today at https://www.healthcare.gov via the on-line exchanges set up by certain American states or from health insurers or brokers specialized in health insurance are not typically designed to provide adequate cover for treatment outside the US. As such, individuals who have these products may be exposed to significant costs.
Is health insurance still mandatory?
Yes, the 'Individual mandate' remains in place.
What are the keywords to understand PPACA / ACA?
Patient Protection and Affordable Care Act (ACA) = name of the flagship law based on the two mandates issued by President Obama which form the key basis for reform of the social protection system in the US.
Individual Mandate or Individual Shared Responsibility Provision = obligation for legal permanent residents, foreign nationals resident in the US and their family members to fulfill one of the following criteria:
- to have a health insurance policy that is considered as ‘Minimum Essential Coverage’;
- to be eligible for an exemption from the requirement for health insurance.
Minimum essential coverage (MEC) = health insurance cover provided under a ‘government-sponsored program’, an ‘eligible employer sponsored plan’ , a contract in the ‘individual market’, a ‘grandfathered health plan’, or any other coverage recognized by the Department of Health and Human Services (HHS), in agreement with the Secretary of the Treasury, as ‘Minimum Essential Coverage’.