So I'm realizing aspects of this blog are going to turn into more of a, "Frequently Asked Questions" where I write a lot about the different things that come up quite regularly. Well this afternoon, I decided to write about one of the more frequent questions I get asked. And that is about health insurance and healthcare while traveling or adopting a nomadic lifestyle...
"So what are you going to do about insurance?"
Well, to be perfectly honest, for a long time I didn't have an answer to this question! It took a lot of research to determine what my options are and which ones are best for me. At the end of the day, I decided that it would be best for me to incur the annual fee for not having Minimum Essential Coverage (MEC) as defined by the Affordable Care Act (ACA) and get insurance through a broker who set me up with only exactly what I need and nothing more.
"What exactly do you need?"
Considering that I've been to a doctors office for being sick maybe three times in the last five years, I really only need emergency medical care, such as coverage for visits to the ER, a Hospital, or an Urgent Care facility. I take great care of my health and pay attention to my body, it's needs, what it responds to, what it doesn't, my emotional state, and all kinds of other things. That being said, I will eventually make some posts about positive life style choices and how to best listen to your body too! The one thing that's a bit unfortunate about having Short Term Coverage is that I will no longer have annual checkups, which are highly important for determining if you are developing a problem and catching it before it becomes a more serious problem. Keep in mind, everyone needs something different. I happen to be very lucky and fortunate that I am still relatively young and healthy. If I need to visit a doctor or get a prescription, I will just have to pay cash out of pocket.
"How did you decide the 'best route' for you?"
I decided my best route by looking at all of my different options. Which were;
Option A) Go on about traveling without insurance and just eat whatever emergency costs that may arise, after all, I haven't broken a bone or anything in years (long time thrill seeker here)
Option B) Get full coverage insurance through the Health Care Market Place under the Affordable Care Act or...
Option C) Get a healthcare plan that doesn't meet the MEC via the ACA's definitions and incur the penalty fee.
Option A - no insurance, isn't reasonable for me. For my first trip, I will be hiking a lot and I could very easily injure myself without meaning to... They're called, "accidents" for a reason. So that was off the list right off the bat.
Option B - Obtain insurance through the ACA. I decided against this because I was in a bit of a unique situation. Essentially, I found out that there is a Minimum Income Threshold of $12,500 per year that if you make that much or more, you are required to have MEC or face a fee for not having health insurance. As it turns out, this fee is $695.00 per person, per year OR 2.5% of your annual income, whichever is greater. Well my income wasn't very high, just enough to be above the Minimum Income Threshold, so in my case, the penalty fee was higher. That breaks down to about $57.92 per month per person. While I was above the threshold, my income put me in a bit of a limbo situation as I was only able to get very small premiums through the ACA to get MEC. It would have cost me around $180.00 a month to get this coverage. Granted, I would get the ability to visit doctors should I fall ill, but I'm not really concerned about that as I mentioned earlier. Also, I found out that if my income increases, as in if I get a job again this year, then I may be required to pay back some of the premium discounts as my income will be higher, so that means possibly more taxes later. So Option B seemed alright, doable if needed, but not great...
Option C - So it should go without saying that this option is going to start at a minimum of $57.92 per month for not having MEC and incurring the penalty fee. I researched and called many insurance companies. The whole process took me literally about three weeks between determining the jargon used in the Health Care Industry, checking out companies via the Better Business Beau (BBB), obtaining quotes, and more . Eventually I found a broker that was able to provide the insurance I was looking for (short term coverage) at only $62.00 a month. We spoke mostly about my concerns and developed an exact plan for exactly what I need and not a single thing more. Combined with the penalty fee I will incur (as this plan does not meet the Minimum Essential Coverage definition) this option comes out to be just shy of $120 a month. That means if I choose this option, I will save roughly $60 a month as compared to Option B; again, all while only getting exactly what I need for my concerns.
So I went with Option C as $60 a month may not sound like a lot to some people, but being a budget traveler, assuming I'm spending an average of $10 a day traveling around SE Asia, that's enough funds for two months of traveling...
"I thought if you were out of the country or traveling, you don't have to participate in the ACA?"
Like anything else in this world, it's not so black and white. There are a few things to the ACA (that are called exemptions) which can allow you to forego the penalty fee for not having MEC.
The first of which is called the Short Gap Exemption. Essentially, you have two months from the last time you had insurance to obtain insurance again. If you have insurance during any day of the month, it counts that you had insurance that month. As an example, If your insurance runs out on January 1st, you're considered to have had insurance for January, even though you may have only had MEC for one day that month. This would mean you have all of February and March to determine your best route and get insured with MEC insurance before May. The reason I say it this way is because you only need to obtain insurance for one day, any single day, in the month of April, and you won't incur any fee since you will have been considered to have MEC insurance for that month and you'll still meet the Short Gap Exemption definition. In short, you cannot go more than two consecutive months without MEC insurance without inuring the penalty fee.
*On a side note, in my research, I found that you have to apply for MEC insurance through the ACA or Health Care Market Place 15-30 days before it can be accepted and processed. So if I apply for insurance on the April 15th, it's likely that my insurance will not start until May 15th. Which can be problematic if you need your insurance to start in a week; such as in the month of April in the example. Just something to keep in mind...
The next exemption is the Expat Exemption. This is an IRS exemption that was developed to assist with Americans who make money and file taxes in the US, but are living abroad. In short, you MUST be out of the country for a total of 330 days a year. Yes, you read that right; three hundred thirty days, a year. You can only receive this exemption if you are out of the country a cumulative total of 330 days, not just consecutively. Meaning if you come back to the US for one week in January, one week in April, one week in July, and one week in October, then a week in December for the holidays, you'll still be able to claim this exemption as you will have been out of the country for all but a total of 35 days in the year. But say if your flight is delayed and you wind up staying a week and two days in December. You'll have been in the US for a total of 37 days and you would no longer be eligible for the Expat Exemption from the ACA (or the IRS for that matter).
The last exemption, is simply the Minimum Income Exemption. If you make less than $12,500 a year, you are not required to participate in the Affordable Care Act. It's that simple.
"So what does this all mean?"
This all means that if you take the time to determine your needs, research your options, you can make the best decisions you can, for you and your situations. In business school, we learned that we can make the best decisions if we have total and accurate information. While it's impossible to gather absolutely accurate and complete information, and lots of it, we can do our best. So I encourage you to take time and really explore your options in this situation and any others you may encounter.
At the end of the day, with all else equal, I will have not have to pay for any penalty fee or not having MEC insurance for May and June. I will begin receiving the penalty fee this July, along with my Short Term Coverage plan starting in July. This plan provides for my exact needs and saves me a total of roughly $360 in health insurance costs this year while giving me what I need. Option B would have cost me a total of about $1,080 for the rest of the year; while Option C will provide me exactly what I need for a total of about $720 for the rest of the year.
"What about when you're traveling out of the country?"
There's this cool stuff out there called "Travel Insurance" - definitely look into it. There's all kinds from protecting your electronics to providing reimbursement for healthcare expenses abroad. These plans do not meet the MEC for the ACA, but it's very affordable and can cover most things you'd need. So far, I have found an attractive plan that is as little as $0.30 a day (or $18 a month) to cover my bare needs while traveling overseas. (Keep in mind that's for a 27 year old healthy male with no problematic health history.) I'll still incur the penalty fee for not having MEC so my total monthly cost will be around $75.92 a month for health insurance while traveling abroad.
Summation of the points above to help you determine your best course of action...
- Minimum Income Exemption is $12,500 or less a year
- The fee for not having Minimum Essential Coverage (MEC) as defined by the Affordable Care Act (ACA) is either $695 per person per year or 2.5% of your income, whichever is greater. *This is for 2016 only, as the fee will increase each year
- Short Gap Exemption states that you can go a total of two months out of the year without MEC Insurance and not have to pay the penalty fee
- Expat Exemption states that if you are out of the country for 330 days a year, you do not have to participate in the ACA; however if you are in the USA for 36 days or more, cumulatively and not just consecutively, then you do not quality for this exemption
- Using the Health Care Market Plan can take up to 30 days to accept and process your applications, keep this in mind to avoid the penalty fee if you are in a time crunch
- If your income unexpectedly increases, you may owe money back on the discounts you can elect through the Health Care Market Place
- Research all your options and gather as much information as possible to make the most educated decisions for your situations
- Travel insurance can be pretty affordable but does not meet the MEC so you will receive the penalty fee
**Remember that you cannot put a price on good health. It is often better to have something and not need it, than to need it and not have it. I am in no way suggesting you cut corners or do anything just to save money. Your health should be your number one priority, physical and mental. This article is intended to provide examples of my experience and show how I made the decisions in which I did. I am in no way am I providing you with advice, legal or otherwise. And please do your best to stay happy and healthy :)
Just your average, not so average, guy! Here you can follow my travels, learn to travel yourself, check out some cool photography, and otherwise follow along as I explore my interests from performance arts to traveling to philosophy and more!
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