If you're an American citizen the Patient Protection and Affordable Care Act (PPACA or Obamacare) affects you. If you're a sailor heading to far off locales or residing in foreign lands for prolonged periods of time, your interaction with the PPACA is going to get interesting.
As a full disclaimer, I work in the insurance space but am not acting as an agent or providing personal counsel. I'll source everything directly; you can read the details yourself. This legislation is also evolving so look for updates. In fact the law is changing so rapidly that I urge you to view the real Code of Federal Regulations (CFR) viewer on ECFR.gov. In researching this article I found several out of date CFR's from sources as reputable as Cornell Law and CFRRegsToday. Cornell at least notes that there are updates not reflected in their texts.
Q. I'm sailing outside the United States, do I need health care insurance even though I'm not in the USA? Come on bro, I don't need insurance, do I?
Basically, by January 1, 2014, almost every American citizen requires health insurance that meets certain standards ("minimum essential coverage"). The IRS has listed a few exemptions from the PPACA, criteria that if you match, you do not need to have insurance. Two of these exemptions are relevant to many long distance sailors: the 330 rule and the no-filing-requirement rule.
Q. What's the 330 rule?
The IRS has had the Foreign Earned Income Exclusion (FEIE) for a while, which basically lets you exclude up to ~$90K of income every year from federal taxation. To qualify, the IRS has a Physical Presence Test to verify that you spent 330 or more days of the year outside the United States.
Why this matters is that the IRS is using the same logic to determine if you are exempt from the PPACA's individual mandate.
There are a lot of variables to the physical presence test, so consult IRS Pub 54 for more information. In short, if you qualify for the FEIE, you are excluded from the PPACA's individual mandate.
Q. But bro, the requirements and realities of medical coverage are completely disjointed. In some places there aren't even medical services, and even just the definition of preventive coverage is different.
The Departments of Labor, Health and Human Services, and Treasury (noted as "The Departments") have joined together to address problems with the PPACA, including its enforcement to expatriates. To that end, there is a smidgen of wiggle room because they are still working on it. New legislation will come into play by January 1, 2015, and until then you'll see the 2014 year marked as the "temporary transitional period."
Q. I'm on Medicare Part A, Medicare Advantage, or a Medicade plan. Do I need to buy coverage?
No. Medicare Part A and Medicare Advantage provide "minimum essential coverage", and most Medicade plans do but you'll need to check specifically on your plan provider's website.
Q. Well I still need insurance, what kind of insurance do I need to have then?
If you're covered under Medicare Part A, Medicare Advantage, or most Medicaid plans you don't need to do anything. All of those, and typical employee (or self) provided health insurance plans provide"minimum essential coverage". These coverages are sufficient through the 2014 temporary transitional period and onward through 2015.
Note: this does not include "self insured plans" where you just squirrel away money in an account and call that a medical insurance plan.
This however is of little help to people who meet the following conditions:
- You make enough income that you are required to file an income tax return.
- You do not have a health insurance plan that provides "minimum essential coverage".
- You spend less than 330 days outside the USA every year.
- There is no other reason, that the IRS will believe, that you are exempt from the PPACA.
If that's you, starting in January 1, 2015 you'll need to have a PPACA compliant health care plan. Starting in January 1, 2014, you'll either need a USA plan that covers you when you travel internationally or you'll need an expatriate plan. The definition of an expatriate plan is as follows:
For purposes of this temporary transitional relief, an expatriate health plan is an insured group health plan with respect to which enrollment is limited to primary insureds who reside outside of their home country for at least six months of the plan year and any covered dependents, and its associated group health insurance coverage.
So you'll need to read the specific plan details to see if your expatriate policy has the exclusion of it only being available to people outside their home country for six months.
Q. So wait, we saved up for a couple of years of cruising. We're not planning on working and if we do it will probably be under the table or just random non-reported income. Do we need to buy insurance?
Probably not. You can be exempt from the PPACA individual mandate for several reasons, one of which is if you don't make enough money that you need to file a tax return. Use the IRS's calculator to determine if you need to file a tax return, and if you don't, the PPACA individual mandate does not apply to you.
Working on a guy's boat or in a local bar for cash on the barrelhead is one thing, but take note of FATCA which now has many foreign governments reporting the transactions of US account holders directly to the IRS.
Additionally, if you spend at least 330 days or more every year outside the USA, you meet the physical presence test, exempting you from the individual mandate via that mechanism.
Q. What is an expatriate health insurance plan?
Most "expatriate plans" (a.k.a. international plans) do not include coverage inside the USA, however most USA plans do include coverage abroad. The reason is simple: health costs in the USA are astronomical, usually to the tune of 7x the international average. A regular check up in San Diego might cost $100, as where in Mexico it can be $10.
Also note that nearly all expat plans, and USA plans rendered abroad, are reimbursement plans. You pay out of pocket and file a claim, to which you'll get paid back by the insurance company upon their review. Check the terms and notes in your policy as it will generally be quite different than what you may have experienced in an employee sponsored stateside plan.
Whether you travel with a stateside or expat plan you'll need to keep your receipts, file claims, and take an active role in your insurance.
Q. This all seems expensive, I'll just pay the ~$100/year per person penalty.
I'm sure many will but by 2016 it will be roughly ~$700/year per person getting pretty close to the cost of most health care plans. At that point you're spending a decent amount of money without getting anything from it.
Also note that for some countries, like France, if you want a long-term visitor visa you'll need proof of medical insurance (which has nothing to do with PPACA). So ignoring the law in the short term, forgetting about the value of medical insurance itself, is feasible, but as the years tick by you'll probably feel the squeeze.
Q. What are my options and where can I get a policy that satisfies the 2014 year and then the 2015 year?
This is already a pretty dry blog post, but in a future one (soon) I'll review some some health care plans and discuss their details.
If anyone has any comments, questions, or thinks there's a different interpretation of the laws please let me know.