The decision for a U.S. citizen or resident living overseas to maintain U.S. health insurance depends on their situation. For expatriates, holding a domestic U.S. plan is often less about meeting medical needs abroad and more about navigating complex U.S. tax and residency laws. Understanding how U.S. regulations interact with foreign residency is the first step toward making an informed choice about healthcare coverage.
Understanding ACA Requirements for Expatriates
The Affordable Care Act (ACA) requires U.S. citizens and residents to maintain Minimum Essential Coverage (MEC). Although the federal penalty for non-compliance was reduced to zero in 2019, the legal requirement to maintain coverage or qualify for an exemption remains. Americans living abroad typically qualify for an exemption by demonstrating residency primarily outside the United States.
Expatriates meet this exemption criteria through three tests, all requiring the tax home to be in a foreign country. The Physical Presence Test requires being physically present abroad for at least 330 full days within any 12-month period. The Bona Fide Residence Test requires demonstrating genuine, uninterrupted residence in a foreign country for an entire tax year.
Individuals meeting either test can claim this exemption on their U.S. tax return. The third option is the Tax Home Abroad exemption, which applies if the tax home is abroad and coverage is lacking for a short gap of less than three months. This mechanism ensures most long-term expatriates avoid penalties for relying on foreign health coverage.
Limitations of Domestic US Health Insurance Abroad
Keeping a standard U.S. domestic health insurance plan, such as an HMO or PPO, is generally impractical for living overseas. These plans are designed around restricted domestic provider networks within the United States. Once you leave the country, you move out of the defined service area, meaning any care received is considered out-of-network.
Receiving out-of-network care internationally results in significant financial exposure, as the patient is responsible for a larger portion of the bill. While many U.S. plans offer limited global emergency coverage, this rarely extends to routine doctor visits, prescription refills, or non-emergency specialist consultations. Filing a claim from abroad is also cumbersome, often requiring the policyholder to pay the foreign provider upfront and then seek reimbursement.
Many U.S. health insurance companies require the policyholder to maintain a primary residence in the United States to keep the plan active. If residency is established abroad, the domestic plan may not cover the individual or may be canceled entirely. Maintaining a U.S. domestic plan is ineffective for day-to-day healthcare needs overseas and offers minimal practical security.
Healthcare Alternatives for Living Overseas
Since U.S. domestic plans offer limited utility abroad, practical alternatives for healthcare overseas fall into three main categories. The most comprehensive option is international health insurance, which is specifically designed for expatriates. These global plans offer extensive coverage across multiple countries, often including medical evacuation and repatriation.
International health insurance plans allow policyholders to choose from a global network of hospitals and doctors, covering both routine and emergency care. Unlike domestic U.S. plans, these policies process claims and authorize treatments efficiently from anywhere in the world. They function as a complete primary health coverage solution, providing access to quality care globally.
Another option is enrolling in the host country’s national healthcare system, provided the individual is legally permitted to do so. Many countries allow long-term residents to use their public healthcare services, which is a cost-effective solution for comprehensive local care. Alternatively, purchasing a local private health insurance plan can cover gaps or provide faster access to private hospitals. Note that short-term travel insurance is only for unexpected emergencies and is not a substitute for a long-term health plan.
Planning for Reentry and Future US Coverage
Expatriates planning to return to the United States must manage the transition back into the U.S. healthcare system carefully to avoid coverage gaps. Moving back is a qualifying life event that triggers a Special Enrollment Period (SEP) under the ACA. This SEP allows the returning individual to enroll in a new health plan through the Health Insurance Marketplace outside the standard Open Enrollment window.
The returning expat typically has a 60-day window from the date of their move back to select and enroll in a qualified health plan. It is important to document foreign residency and the date coverage ended to prove eligibility for the SEP. Maintaining records of foreign health insurance while abroad is beneficial.
For older Americans, long-term absence can affect future Medicare eligibility, which is based on a minimum number of quarters of Social Security contributions. An individual must have at least 40 quarters of covered employment to qualify for premium-free Medicare Part A. Expats who have not worked long enough may need to purchase Part A coverage at a premium.