Contributed by John Rice, CFA, CFP® Last month I wrote about the Affordable Care Act (often referred to as Obamacare) and how, even with all the troubles with the website, it should offer some great alternatives for Canadians that are moving to the US for a couple of reasons. Here I will cover some more features related to obtaining health care insurance in the US for incoming residents.
Many Canadians coming into the US have found it difficult if not impossible to obtain full major medical coverage in the US. One group that has experienced greater challenges than most are people over age 65 that have not been in the US for five years. The US medical insurance system is set up to transition most people to Medicare at age 65 so many companies are not set up to deal with folks that are 65 or older but not eligible for Medicare.
You may be aware that one of the requirements to get Medicare is to have been in the US for five years. People that are 65 years of age but do not yet meet the five year residency requirement often find that they can’t get full major medical insurance.
That is about to change. US residents that are over age 65 but do not yet qualify for Medicare, should be able to obtain major medical coverage under the newly evolving medical system of Obamacare.
Last month we called three different insurance companies in Florida to ask if they could write policies over age 65. In 2 cases they said yes and one said no. We suspect that the one that said no will be able to offer this insurance starting January 1, 2014 because it will be required by law. Perhaps we just did not communicate this effectively or the representative we spoke to was not familiar with the new offerings. We find that there are very few people that understand the new health insurance system so we are not surprised at the amount of misinformation we hear.
Another question we asked is whether someone without a Social Security Number (SSN) will be able to obtain insurance. For Canadians reading this blog post, the SSN is the version of your Social Insurance Number. Most US residents have a SSN but if someone is coming from Canada it is often difficult to obtain one, even if they are filing US tax returns. Typically, the IRS will require anyone filing a US tax return to obtain and Individual Taxpayer Identification Number (ITIN), which is different than a SSN. In no circumstances should any Canadians use their SIN on any forms that ask for an ITIN or SSN.
What we found is that health insurance can be obtained without an ITIN or SSN as long as a person has proof of US residency such as the right type of VISA or their green card. So in cases where someone is just coming to the US and has not applied for an ITIN yet, they can still obtain the health insurance.
A third point is that there is an “open enrollment” period for Obamacare, similar to US Medicare. The open enrollment period for Obamacare is between Oct 1, 2013 and March 31, 2014. This may be extended after all the problems with the website. But unless it gets extended, you will need to apply for your policy before March 31, 2014. Please also be aware that you will be able to apply for Obamacare after the open enrollment if there is a life changing event, such as a move into the US or a move from one state to another state, or moving away from a company insurance policy so that you need individual coverage.
Finally, I want to mention the penalties because they are not getting much notice at this time however, high income earners may be in for some surprises here. The penalty for not being covered by a policy that qualifies under Obamacare is 1% of AGI. This penalty increases to 2% in 2015. There is also a minimum penalty but I will limit this discussion just to the percent penalty. If you have high income, this penalty can quickly add up, and is only capped at the cost of a policy. For example, if you move to the US with an income of $200,000, and don’t obtain an Obamacare qualified policy, you could face a penalty of $2,000 for 2014 and $4,000 in 2015.
In the past, the best alternative for some people that come to the US was international medical insurance that is often a lot cheaper than major medical insurance. Now you have to consider the cost of the tax penalty as you make this decision
There is a lot of confusing information out there about Obamacare policies. And many insurance professionals are just getting up to speed with the new marketplace. Add the additional complications for people that are just coming to the US and you can see why there seem to be more questions than answers at this point. Proceed with care and contact us if you have questions.