Everything you need to know about Obama Care (also called PPACA or ACA) in 7 questions

The ‘Patient Protection and Affordable Care Act’, also known as PPACA / ACA, was implemented to address the constantly increasing cost of medical care in the USA and the significant portion of the American population with no medical insurance.

01 /
What are the main reasons why Obama Care (PPACA / ACA) was implemented? 

At the heart of the reform are three key principles: guaranteed cover, uniform rates and the concept of the ‘individual mandate’ (also known as the Individual Shared Responsibility Provision).

The individual mandate requires that all permanent residents in the USA have a minimum level of health insurance (Minimum Essential Coverage, known as MEC). As such, it is required for individuals with an annual income above a specified level to purchase health insurance, with a fiscal penalty for non-compliance (Shared Responsibility Payment).

02 / Who are the Individuals exempted from the obligation to subscribe to health insurance that is ‘MEC’?

Those exempt from the obligation to subscribe to health insurance that is ‘MEC’ fall into two key categories:

The following categories of foreign nationals resident in the US:

And:

The following categories of US nationals:

03 / What are the applicable conditions for individuals required to have a health insurance that is ‘MEC’?

With the exception of the cases mentioned above, the ‘Patient Protection and Affordable Care Act’ rules apply to all other individuals considered to be:

Anyone travelling to the US on a temporary basis (and therefore not a permanent legal resident) is not subject to the requirement to have health insurance that is ‘MEC’. US nationals residing outside the US for over 330 days in a 12 month period are treated as having ‘MEC’.

Purchasing a plan which is not ACA-compliant when settling in the US is possible, but if you are liable for tax in the United States, you will certainly need to pay an additional tax penalty.

As is the case with many other international health insurance products, the individual ASFE product range by MSH is not considered as ‘MEC’ and does not meet the requirements of the PPACA in respect of the Individual Mandate. Accordingly, individuals with such health insurance cover are exposed to payment of the fiscal penalty (Shared Responsibility Payment) on completion of their tax returns.

04 / How is the ‘Shared Responsibility Payment’ calculated?

The penalty for 2016, based on revenue in 2015, will be calculated according to the two criteria below.The amount you are required to pay is the higher of the two:

Examples of fiscal penalties:

2015 - family of 4. Taxable revenue (after application of the threshold) = $ 80,000;
fiscal penalty = $1600. As $ 1600 ($80,000 x 2%) is higher than $975 (($325 x 2)+($162.50 x 2));

2015 - couple. Taxable revenue (after application of the threshold) = $ 30,000;
fiscal penalty = $ 650. As $650 ($325 x 2) is higher than $600 ($30,000 x 2%).

05 / Do health insurance products that meet the requirements of the Individual Mandate provide an adequate level of cover outside the US?

Health insurance products available today at https://www.healthcare.gov via the on-line exchanges set up by certain American states or from health insurers or brokers specialized in health insurance are not typically designed to provide adequate cover for treatment outside the US. As such, individuals who have these products may be exposed to significant costs.

06 / Does the fiscal penalty (linked to the purchase of a health insurance product not considered as ‘MEC’) consistently outweigh the savings I could make on purchase of a health insurance product that meets the requirements of the individual mandate?

Not necessarily. This depends on your level of income, the type of health insurance product you have and the nature of your medical expenses.

07 / What are the keywords to understand Obama Care (PPACA / ACA)?

Patient Protection and Affordable Care Act (ACA) = name of the flagship law based on the two mandates issued by President Obama which form the key basis for reform of the social protection system in the US.

Individual Mandate ou Individual Shared Responsibility Provision = obligation for legal permanent residents, foreign nationals resident in the US and their family members to fulfill one of the following criteria:

Shared Responsibility Payment (SRP) = if the taxpayer or any other person in the taxable household does not have health insurance which is recognized as ‘Minimum Essential Coverage’ and is not eligible for an exemption for any month of the respective tax year, the taxpayer must calculate the amount due for his / her « Shared Responsibility Payment ».

Minimum essential coverage (MEC) = health insurance cover provided under a ‘government-sponsored program’, an ‘eligible employer sponsored plan’ , a contract in the ‘individual market’, a ‘grandfathered health plan’, or any other coverage recognized by the Department of Health and Human Services (HHS), in agreement with the Secretary of the Treasury, as ‘Minimum Essential Coverage’.

To go further:

Please refer to the following links made available by the IRS (Internal Revenue Service) for more detailed information about the applicable rules under the Affordable Care Act.

 
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