Important Information about the Affordable Care Act

At this time, there are no individual expatriate plans sold to Americans that meet the definition of Minimum Essential Coverage (MEC) and thus meet the individual mandate. Why is this important to you? Because the plan you are applying for does not provide Minimum Essential Coverage and is filed as a limited duration policy designed specifically for international living. Coverage by the insurer can be: 1.accepted 2.accepted with a rate increase, or 3.denied based on the health history of the applicants(s).

U.S. citizens working and living abroad who are outside the states for 330 days or more in a 12-month period are not required to maintain MEC. In this instance, you are deemed to have met the individual mandate. Additionally there is no tax penalty applicable to J1, F1, M1 visa holders and other populations that meet one of the exemption categories related to the ACA individual mandate.

You and your family must either have a (MEC) health plan throughout the year, qualify for an exemption from coverage, or make a payment when you file your federal income tax return.

What is the tax penalty for a non MEC plan?

2015: The higher of $325 per person (up to 3 people, or $975) OR 2.0% of taxable income up to the penalty cap.
2016: The higher of $695 per person (up to 3 people, or $2,085) OR 2.5% of taxable income up to the penalty cap.
After 2016: The same as 2016, but adjusted annually for cost-of-living increases.

In each year, the penalty is capped based on the national average premium for bronze level insurance plans for single individuals and the number of people in the insurance unit. Specifically, the cap equals that average premium times the number of people up to a maximum of five. The average bronze plan premiums for an individual for 2015 and the projected premium for 2016 are:

    2015:  $2,484 annual/ $207 a month per individual
    2016:  $2,676 annual/ $223 a month per individual

For an explanation of how the average bronze plan premiums were calculated see:

    2015:  IRS Internal Revenue Bulletin: 2015-15.
    2016:  IRS Internal Revenue Bulletin: 2014-33.

For specifics on how the shared responsibility payments are calculated and more information on the ACA, visit GeoBlue Affordable Care Act FAQ's

ACA Background

The Patient Protection and Affordable Care Act (PPACA), also known as the Affordable Care Act (ACA), was first introduced to increase the quality and affordability of health insurance and lower the number of uninsured Americans.

Three key features make up the ACA: plans are guaranteed, community rating, and an individual mandate. Click here for an overview of the key features of the ACA.

American expats need to carefully consider their healthcare options balancing both financial and emotional risk.

Helpful Links

The information expressed above is for general, instructional purposes only and should not be considered as legal or accounting advice. Applicants should consult a tax professional for a comprehensive evaluation including whether or not a tax penalty may apply based on your own individual situation.