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Affordable Care Act (Four Part Series)

Courtesy of Keyser Benefits

(Note: This is the 2nd article of a 4 part series on the Affordable Care Act courtesy of Keyser Benefits)

Does the individual mandate apply to Americans living or working abroad?
 
Generally, yes, but there is a potential exception that applies in certain circumstances under which individuals residing outside of the United States or in a U.S. possession for tax purposes are deemed to maintain the required health insurance. The individual mandate applies to "applicable individuals," which is defined very broadly as including individuals who are citizens or nationals of the United States or aliens who are lawfully present in the United States (aliens who are not lawfully present in the United States are exempt). Thus, the individual mandate generally applies to Americans living or working outside the United States.

The potential exception under which certain individuals residing outside of the United States are treated as having the required health insurance applies in the case of an individual whose tax home is in a foreign country and (1) who is a U.S. citizen who establishes to the IRS that he is a "bona fide resident" of a foreign country or countries for an uninterrupted period that includes an entire taxable year, or (2) who is a U.S. citizen or resident who has been physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months. Certain "bona fide residents" of certain U.S. possessions also are treated as having MEC for purposes of the mandate.

These residency tests are Internal Revenue Service ("IRS") tests that are subject to IRS review, Please note that the application of these tests is very fact specific, so all tax filers are encouraged to discuss their particular situation with their tax and legal advisors.

Does the individual mandate apply to foreigners living or working in the United States?

Yes, as described above, the individual mandate applies to aliens lawfully present in the United States. This determination also is a very fact sensitive and so individuals are advised to seek their own tax and legal advice as to their particular situation. Insurance provided by a home country government or a foreign issued insurance plan is not automatically considered to be MEC for the purposes of the individual mandate, though individuals and/or plans may submit their plans to the Department of Health and Human Services (HHS) for consideration. The submission and approval process, including the timeframe for the same, has not yet been fully defined by HHS.

Can expatriates meet the individual mandate requirements in any other circumstances?

Yes. Many US--issued, fully-insured, employer-sponsored expatriate plans have been deemed to meet the MEC requirements for purposes of the individual mandate through the end of 2015.

This relief does not extend to non-US issued employer sponsored expatriate plans. Additionally, US expatriates who meet the bona fide foreign resident tax exemption are deemed to meet the mandate requirements, regardless of the type of coverage they have. All bona fide residents of United States territories are treated as having MEC for the purposes of the individual mandate, but this too is a technical IRS determination and all customers and clients are encouraged to discuss their particular situation with their tax and legal advisors. There are many other exemptions to the penalty which include financial hardship, religious and other exemptions.

Ultimately, any person subject to MEC requirements has the choice to either pay the penalty, select coverage which meets the requirements, or apply for an exemption. It is important to note that "PPACA compliant" coverage is not tied to obtaining a visa to work or enter the U.S. The absence of MEC results only in a tax penalty.