The US healthcare system was vastly overhauled in 2013 with the Patient Protection and Affordable Care Act (ACA), nicknamed ‘Obamacare’ in reference to the previous US president, Barack Obama, who led the reform.
With the arrival of President Donald Trump in power, the American healthcare system has undergone further changes. This article discusses the consequences for expats of the various reforms of the American healthcare system.
What is the Affordable Care Act?
Entered into force on October 1, 2013, the Affordable Care Act is the largest health reform in the United States since the creation in 1965 of Medicare and Medicaid – government programs providing free health insurance to the elderly (Medicare) and those on a low-income (Medicaid).
The reform is based on:
- The principle of universal medical coverage
- Creating online health insurance marketplaces selling ACA compliant insurance plans
- An extension of Medicaid to people with incomes of 138% of the US federal poverty line (FPL)
- The guarantee of minimum essential health coverage
By setting up the ACA, the ambition of the former US President Barack Obama was to solve the structural problems of the American healthcare system, including inequalities in access to care and costs which were too high. The aim was to cover the 15% of the American population who had no medical insurance and reduce the cost of health per person for the state.
One of the cornerstones of ACA was the obligation for individuals and employers to take out an ACA compliant health insurance. This included expats resident in the United States (green card or work permit holders).
However, the Trump administration revoked the individual mandate from 2019 onwards. In the majority of the American states, individuals now have the choice whether to take out an ACA compliant insurance or not. Employers with more than 50 employers must still purchase an ACA compliant policy for employees working more than 30 hours a week.
What is an ACA-compliant health insurance?
The ACA more strictly regulates private insurance companies so that they are more favourable to the insured. Previously, many abuses were noted on the part of insurers to the detriment of the health of the insured.
Only insurance companies registered with federal authorities and meeting certain criteria can issue ACA-compliant health insurance policies in the United States. For example, insurance companies are prohibited from refusing to insure an individual, imposing higher fees on people with medical problems, capping expenses, not covering people with pre-existing illnesses and cancelling the policies of people with a serious illness. The ACA also eliminated lifetime limits in healthcare policies relating to essential services.
ACA-compliant insurance policies must provide at least these ten health benefits:
- Ambulatory patient services (outpatient care)
- Emergency services
- Maternity and newborn care
- Mental health and addiction treatment
- Prescription drugs
- Rehabilitative and habilitative services
- Laboratory services
- Chronic disease monitoring, wellness services and preventative medicine
- Paediatric services for children, including dental and ophthalmology
As we will explain below, the obligation to hold an ACA compliant health insurance (individual mandate) has been revoked, which reopens the insurance market to insurances companies that don’t necessarily follow the guidelines of the ACA.
The Affordable Care Act under the presidency of Donald Trump
The current American president Donald Trump has always strongly opposed Obamacare. His arrival in power was accompanied by new reforms concerning the ACA.
After a failed attempt to repeal Obamacare, Donald Trump’s administration has recently managed to pass amendments that change the foundations of the system. Firstly, the administration cut promotional funds that encouraged people to subscribe for individual health insurance coverage via an internet portal and with the aid of tax credits.
In December 2017, the obligation for every individual to have health insurance (the individual mandate) was revoked on the federal level. This reform, which came into force in January 2019, only affects Americans (or expats residing in the USA) who are insured individually. If you are an employee in a company of 50 employees or more and you work more than 30 hours a week, your employer must retain an ACA compliant health insurance policy for you or they will be subject to a fine. The majority of the population in the USA is insured through their employers or through a public health scheme, and these have not been affected by this new reform.
This reform, however, was considered a big step backwards for Obamacare. At the time of its adoption, the individual mandate was considered an essential element of the financial equilibrium of the Affordable Care Act.
Universal medical coverage means that ill people are not the only ones to take out health insurance. By ensuring that healthy people are also insured, insurance risks are spread and rates for all can be kept down. Conversely, a larger proportion of insured people with a more complex medical history results in a more costly population to insure, and therefore a general increase in the rates of insurance policies.
In a report dated May 2018, the Congressional Budget Office wrote that an increase in insurance premiums of 15% per annum was expected as a result of the Obamacare reforms, as well as a total of 35 million uninsured people in 2027.
In order to continue to encourage policyholders to keep their insurance, some states have re-introduced the individual mandate in their territory, such as New Jersey, the District of Columbia and Massachusetts as of 2019. Vermont will implement it from 2020. Other states are likely to follow.
What’s changing under Donald Trump for expats?
The removal of the individual mandate also applies to non-US residents. From 2019, if you are not insured by your employer, you are not obliged to take out individual health insurance anymore; except in the states that have restored the individual mandate.
As an expat in the USA, it is therefore important to check if the ACA insurance individual mandate applies in the state where you are going to live. If it doesn’t apply you can choose the health insurance policy of your choice, be it American or international, ACA-compliant or not. If the individual mandate applies in your state where you live, you can either subscribe to an ACA-compliant health insurance policy or decide to choose a non-compliant policy and pay the penalty: this second option is sometimes cheaper than going for an ACA compliant health insurance policy. As an example, here are some prices for an international health insurance for a non-smoker 39 year old woman, not including dental an optical care: the price would be $21,100 per year with an international ACA compliant policy vs $7,600 to $10,000 a year with a non-ACA compliant policy (not including maternity).
What insurance to take out as an expat in the USA?
Generally speaking, an international health insurance is the more suitable option for the expatriate lifestyle compared to a local health insurance. With this type of insurance, if you decide to seek treatment in your country of origin or another country for a particular issue, your medical expenses will be covered. In addition, if you move to another country after the United States, your international health insurance can follow you, unlike with local insurance.
In light of recent reforms and possible future reforms of the American healthcare system, you may also be wondering if you should go for an ACA compliant or non-ACA compliant health insurance policy (regardless of whether the policy is international or local).
As explained above, some expats in the USA, or their employers, prefer to opt for a non-ACA compliant health insurance policy and pay the penalty because this can end up cheaper than taking out an ACA-compliant policy or because the insurance they chose better suits their needs.
So after 2019, will it be wiser to purchase a non-compliant ACA insurance? This will depend on the type of visa you have, the state where you live, your residency status, your needs, your medical history, and also insurance rates in force on the market. This question can only be answered on a case-by-case basis.
The consultants at Expat Assure can help you in your choice of health cover for the USA. Feel free to contact us or request your personalised international health insurance comparison to benefit from our free expert advice.
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