As one year ends and another begins it is time to start planning that next big trip. Along with that, you will need to start planning how you want to manage your life of obligations back at home. One of these ‘to-do’ items will inevitably be your health care plan. The Affordable Care Act (AKA Obamacare) has been in effect for several years but I never fail to forget how it fits in to my current lifestyle. Let’s face it, the world’s systems just aren’t set up to accommodate the nomad. So every year I have to jog my memory as I try to figure out what the rules are, how they apply to me and how they will fit into this year’s adventure.
There are a lot of sites that offer great information but I find all of them either answer super specific questions, or they dump out an excessive amount of legal jargon for you to sift through. I tried to pull out what I found relevant and present a framework that would allow you to deduce your own plan of attack. No two situations are the same and we all have our own priorities… therefore, I cannot and will not tell you what to do. But hopefully, I can give you some ideas.
Looking at all the information I have decided that there are two ways people will approach this:
- You want to avoid paying for health care premiums that won’t cover you while you are traveling.
- You want to get health care coverage that not only fulfills your obligations under the ACA but will cover you while you travel abroad.
So let’s take a look at both of these scenarios.
Ways To Avoid Paying
Just about every U.S. citizen is required to purchase health care that meets certain minimum requirements (you can find those here) unless they qualify for a handful of exemptions (exemptions can be seen here). There are three exemptions in particular that could be of use to the long-term traveler.
You can qualify for this exemption in one of two ways.
- If you travel outside of the country for more than 330 days in a 12 month period, you are not required to purchase a healthcare plan for any of those months. What sucks is that this is a ridiculous standard. If you spend two months in the country and ten months traveling, you are technically required to pay for twelve months of insurance that only cover you for two! If you are planning a long extended trip, however, then this is your go-to. You can see all of the IRS’s nitpicky requirements here. (Note: the 330 days don’t have to be consecutive and they don’t have to fall in one calendar year. If your year-long trip spans two calendar years, you will be exempt for any months you were gone within that 12 month period).
- You have to show you were a bonafide resident of a country or countries for a full tax year. From my understanding, you could come and ‘visit’ the U.S. for more than 35 days and still qualify in this manner. See how the IRS validates a ‘bonafide resident’.
In all honesty, this is probably the easiest way to avoid paying for healthcare. If you travel long enough within a tax year, then there is a good chance you won’t make enough money to have to file a tax return. The obvious downfall of this is that it may not be within your control. You can find out what the income threshold for your situation is at this link. If you don’t make enough to be required to file a tax return, you can still file one (if you need to get some money back) without having to pay the individual shared responsibility fee. The 2015 Federal Tax Filing Requirement Thresholds were $10,300 for someone single under 65, and $20,600 for a married couple filing jointly (both under 65).
Still not sure if you have to file? You can fill out this form.
This is the trickiest exemption to take advantage of. The short gap exemption is available to anyone who has gone without coverage for less than three months. This means you can go uncovered for up to two consecutive months without having to pay any kind of fine. Of course this doesn’t get you out of paying for insurance all year long, but it does give you some flexibility, especially if you plan your trips right. Furthermore, the rules state that ‘being covered’ simply means any month where you had at least one day of minimum essential coverage (MEC). If you can swing it, you could technically go almost 4 months without coverage and not have to pay a fine. There are some very important things to consider though:
- The two consecutive months without coverage have to be preceded by a month of coverage. This is important to know if your gap in coverage is going to span two calendar years. The example they provide is this: ‘Let’s say you didn’t have qualifying coverage November 2015, December 2015, and January 2016. You’re eligible for the short gap exemption for 2015. But for the 2016 tax year, you’re not eligible for the short gap exemption for January 2016 because you didn’t have coverage for three consecutive months – from November 2015 through January 2016.’
- You can’t claim exemption for ANY months if your gap is for more than two consecutive months. Likewise, if you have more than two periods without coverage and both are only one to two months in length, you can only claim exemption from one of the gaps.
One BIG thing to take not of though, is that you run the risk of not being able to sign up for qualifying health care at all. If this happens, you will get stuck paying the individual responsibility fine for un-exempt months. Why is this a problem? Well, for starters, you can’t really just buy health insurance plans anytime you want during the year. This is to stop people from only buying a plan if something bad happens to them, which would make healthcare for everyone else a lot more expensive. Of course, like with everything, there are exceptions.
The health exchange has a strict enrollment period. You basically have from November 1st to January 31st to sign up for coverage for the year. The only way you can sign up outside of that timeline is if you qualify for a special enrollment period. There are several life events that can qualify you for a special enrollment period (learn about them all here) and ‘moving’ is one of them. If you can prove that you just moved back to the United States from a foreign country, you have 60 days to purchase a healthcare plan. I don’t know what the process of ‘proving’ that it was a ‘move’ and not a ‘vacation’, but depending on how you go about it, you could probably figure something out.
You can see if you qualify for a special enrollment period here. If not, you can always try buying a plan outside of the marketplace. You will need to inquire with individual companies but make sure that the plans you are looking at meet the minimum essential requirements.
The way I see it, this option is great for someone who wants to take a trip for one month at the beginning of the year, two months at the end of the year, or at anytime given that they can prove that they just moved back to the country.
Get Qualifying Insurance That Covers You
I’ll be honest, I was really disappointed with what I found (or rather, what I didn’t) during my research for this. Some people, myself included, have no problem paying into a system that has allowed millions of people to gain access to healthcare. I believe in ‘Obamacare’ despite its many flaws, and I believe it is a step in the right direction. That being said, I HATE paying for something that does not cover me while I travel. I had hoped to discover plans that suited mine and your needs but, in reality, it just isn’t that simple.
First let’s address what ISN’T covered. Short term health insurance plans, expatriate plans and your typical international travel-insurance plans do not meet the minimum essential coverage requirements. So you can buy them but they will not fulfill your obligation under the Affordable Care Act. The only ‘plan’ I found that seems to provide an option for both was from Blue Cross Blue Shield and it is their BlueCard Program. They claim that you can take your plan with you to nearly 200 countries and territories worldwide. I inquired for more information from a couple of these large insurance companies and will update this section as they respond.
For now, you should contact your own insurance company and see what is covered and how their system’s work on your plan while you are traveling internationally. And if you find out anything puh-lease share in the comment section.
Punishment For Not Participating
Last and certainly least I want to mention what your costs are if you decide not to participate in the health insurance game. You will have to make a ‘shared responsibility payment’ for each of the months that you didn’t have qualifying health insurance or qualify for an exemption.
The latest information on the IRS website says:
- Fee is either 2.5% of gross income over filing threshold (see above), or
- Fee is $695 per adult, $347.50 per child, with a family maximum of $2,085 (adjusted for inflation from 2016)
- Total annual fee is divided by 12 and THAT amount is applied to any month you didn’t have qualifying coverage or an exemption (though it is only assessed annually during tax filing)
- ‘Coverage for one day of a month counts as coverage for entire month’
- ‘Liens, levies or criminal penalties are not applied for failure to purchase MEC coverage. The IRS will deduct any amounts owed from current and future tax refunds.’
There are three potential exemptions a traveler can use to avoid paying for health insurance during their time abroad: 1. Be gone for more than 330 days or be a bonafide resident for a full tax year, 2. Don’t make enough money during the year to have to file a tax return, or 3. Use the ‘short gap’ provision to avoid paying for health insurance for one or two months. Just remember with that last one that you can either avoid paying for January, avoid paying for November and December, or ensure that you will be able to enroll in a MEC health care plan outside of the enrollment period.
Right now there aren’t a lot of great options for travelers looking for a plan that will cover them at home AND abroad. This means you either have to go without any coverage, pay for coverage even when it won’t help you abroad, or pay for a qualifying plan at home while also purchasing international travel insurance (thus having two bills). Be sure to check with your provider to see what, if any, benefits you can take with you internationally. At the very least, depending on your travel dates, you either get out of paying for one month by enrolling in January so your coverage starts in February, OR you can cancel your insurance at some point in October to avoid having to pay for November and December.
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