How does the affordable care act affect me since I live abroad?
It doesn’t affect you since you are exempt (assuming you meet certain requirements). You will need to complete form 8965 and submit it with your tax declaration for 2014.
The (not so) small print:
In recent weeks I’ve had a lot of clients ask how the (Patient Protection and) Affordable Care Act (ACA) or “Obamacare” will affect them since they live in Switzerland. This is an excellent question since the provisions of ACA will impact 2014 individual tax returns for the first time.
Section 5000A of ACA, the “individual mandate”, requires individuals to maintain health insurance coverage as minimum essential coverage and ensure that any of their dependents (who are applicable) maintain the same coverage or be subject to a penalty. However, citizens living abroad will be given a coverage exemption as long as they meet the physical presence or bona-fide residence test as indicated when filing the foreign earned income exclusion (form 2555). The physical presence test requires an individual to be physically present in a foreign country (or countries) 330 full days during a period of 12 consecutive months. The bona fide residence test requires an individual to be a resident of a foreign country (or countries) for an uninterrupted period of one tax year and intend to stay in that country (or countries) for an extended time.
If an individual qualifies for the exemption they will need to complete the health coverage exemption form (form 8965) and submit it with their tax return.
Interestingly, the new U.S. system (ACA) is very similar to the Swiss system (Santé Suisse) and is often regarded in the press as a direct comparison. On the surface the two do have similarities with the largest harmony being the individual coverage mandate and the cost.
- Individual coverage mandate: requires all individuals to obtain health insurance
- Cost: both countries rank among the most expensive per capita for health care costs
However, there are drastic differences including the employer mandate, nonprofit insurers, drug price regulation, government plans, quality of care, maximum allowed deductibles and the all payer system.
- Employer mandate (in US, not in CH): Requirement in ACA that all businesses with 50 or more full-time employee’s provide health insurance to at least 95% of their full-time employees and dependents up to age 26. Group health insurance does not exist in Switzerland.
- Nonprofit insurers (in CH, not in US): Basic health insurance is provided on a non-profit basis in Switzerland while many of the insurers on the ACA exchanges are for-profit enterprises.
- Drug price regulation (in CH, not in US): Maximum drug prices are regulated in Switzerland and not in the US. On average, US consumers spend roughly twice as much on drugs as European consumers.
- Government plans (in US, not in CH): There are no government administered plans in Switzerland, which compete with the private insurers. However, health insurance is considered social insurance and is not a for-profit enterprise.
- All Payer System (in CH, not in US): In Switzerland the prices for health care services and products are determined by price schedules which are set by the government or negotiated by insurers and providers. Some states in the US use a system similar to this but often times prices are directly negotiated between payers and providers which results in larger companies getting more benefit and smaller companies paying higher costs.
- Quality of care: Switzerland consistently ranks among the top two in health care rankings among developed nations while the US usually is at the bottom of the list (per the Commonwealth Fund in the UK).
- Maximum allowed deductibles: Maximum allowed deductibles are more than twice as high under ACA vs. the Swiss system.
Ultimately, I think the US took a step in the right direction for mandating healthcare to be an individual requirement but there are serious flaws in the system which puts a huge burden on employers and the government. Ultimately, this will likely cause employers to restructure their businesses to avoid paying for healthcare or the associated penalties and could deter growth. The US should push individual responsibility and make individuals responsible for their health care and ultimately their health and consider taking a closer look at the Swiss system.