The “Patient Protection and Affordable Care Act,” commonly known as PPACA, was first introduced as a measure to deal with rising health care costs and numbers of uninsured.
The heart of PPACA consists of three provisions: guaranteed issue (insurers must offer coverage regardless of the applicant’s health status or pre-existing conditions), community rating (insurers must offer policies within a given territory at the same price regardless of health status, age, gender, or other factors), and an individual mandate. The individual mandate assures that everyone has a minimum amount of coverage: those above a certain annual income are required to purchase coverage or incur a tax penalty; those who cannot afford it are generally eligible for assistance from the federal government to help pay for their coverage.
We sometimes receive questions about PPACA from customers. Below are some frequently asked questions and answers to help you understand PPACA’s impact on the international insurance business.
There is currently no tax penalty imposed on individuals who do not purchase the required PPACA coverage. For 2014-2018, tax penalties were assessed against individuals who did not have minimum essential coverage as required. Legislation enacted in 2017 reduced these penalties to zero effective 2019.
The IRS states that you are a non-resident alien unless you meet either the green card test or the substantial presence test.
According to IRS Publication 519, Tax Guide for Aliens, under the green card test, green card holders are resident aliens for tax purposes. The substantial presence test uses a formula to count the number of days present in the U.S. over the past three years. Generally, you are a resident alien after six months of presence in the U.S. – unless you are exempt.
Here are some Alien Residence examples to assist you.
Seven Corners’ short-term international travel medical products are not a substitute for minimum essential coverage that you may need to have under PPACA. If you are a U.S. citizen, national or legal resident alien in the U.S., you will need to maintain minimum essential coverage unless you are exempt. Exemptions include:
You will not need PPACA coverage for short-term travel to the U.S., unless you are considered an “alien lawfully present” in the U.S.
In general, PPACA does not govern short-term limited duration insurance. However, please understand that under PPACA, short-term coverage must expire less than 12 months after the effective date (and last less than 36 months in total, considering renewals) to meet the definition of a short-term limited duration plan.
Seven Corners’ short-term international travel medical products are not a substitute for minimum essential coverage that you may need to have under PPACA. However, since most PPACA plans do not provide the types of international benefits and assistance that travelers need, you should strongly consider purchasing an international travel medical plan such as Seven Corners’ Travel Medical Insurance for coverage while you travel outside of the U.S.
If you are a U.S. citizen, national or an “alien lawfully present” in the U.S., you will need to maintain minimum essential coverage unless you are exempt. Exemptions include:
In general, PPACA does not govern short-term limited duration insurance, like Seven Corners’ short-term travel medical insurance programs.
However, please understand that under PPACA, short-term coverage must expire less than 12 months after the effective date (and last less than 36 months in total, considering renewals) to meet the definition of a short-term limited duration plan.
If you are a legal resident alien or otherwise required to obtain minimum essential coverage (as discussed above), you will need to obtain PPACA coverage unless you are exempt (as discussed above), or your employer group plan is an "expatriate health plan."
An expatriate health plan is, in part, one in which substantially all of the primary enrollees are qualified expatriates. Qualified expatriates generally include workers transferred to the U.S. for a specific and temporary purpose, individuals working outside the U.S. for at least 180 days in a consecutive 12-month period and traveling charitable workers.
Coverage must also meet other requirements to qualify as an expatriate health plan. For example, the coverage must provide "minimum value" within the meaning of PPACA.
You should consult your own legal advisor in determining whether your coverage is an "expatriate health plan."
As non-resident aliens, international students on F, J, M and Q visas (and certain family members of students) are not subject to the individual mandate for their first five years in the U.S. All other J categories (teacher, trainee, work and travel, au pair, high school, etc.) are not subject to the individual mandate for two years (out of the past six). For more details, see Exempt Individuals: Teachers and Trainees | Internal Revenue Service (irs.gov).
Since international students are not subject to the mandate, they are not required to purchase a plan that meets PPACA requirements and can purchase an appropriate Seven Corners’ plan.
Under the IRS international student exemption, anyone temporarily in the United States on an F, J, M, or Q visa for the primary purpose of studying at an accredited academic institution or vocational school (and certain family members of students), and who substantially complies with the requirements of that visa, is exempt from being treated as a resident alien, and is therefore exempt from the individual mandate as a non-resident alien.
That exemption applies for five years. After five years, a student is generally no longer exempt, and the substantial presence test must be applied. See examples at Tax Residency Status Examples.
Even after five years in the U.S., an international student may continue to be a non-resident alien for tax purposes under the “Closer Connection” exception if they can prove that they still have a closer connection to their home country than to the U.S.
No. Under PPACA, the term “health insurance coverage” means insurance benefits offered by a “health insurance issuer,” which is an insurance company that is licensed to engage in the business of insurance in a State of the U.S. and which is subject to State law that regulates insurance. Seven Corners’ international plans are underwritten by Certain Underwriters at Lloyd’s, London, Tramont Insurance Company Limited, and United States Fire Insurance Company for persons who are not eligible for or required to purchase a PPACA plan. If you are now eligible for or required to purchase a PPACA plan, and the PPACA plan application asks you whether you currently have “health insurance coverage,” you should answer that question “No.”