Health Insurance Enforcement Penalty

By Tom Andrews, CPA

The Patient Protection and affordable Care act commonly referred to as the Affordable Care Act or “Obama Care” was signed into law in 2010. There has been confusion among many yacht crewmembers as to how this law will affect them and if they are required to comply.  In most cases American crewmembers working on US flagged vessels and foreign flagged vessels will be required to comply, there may be some limited exceptions however this column is intended to address the broad compliance issues faced by individuals working in the yachting industry.

The most controversial aspect of the Affordable Care Act is the individual mandate, this provision of the legislation requires most American’s to be enrolled in an Affordable Care Act compliant health care insurance policy. The 2017 penalty for not enrolling in an ACA compliant policy is that the noncompliant individual will be 2.5% of household income.  To make matters more complicated, there was confusion as to the comments made by President Trump regarding his preference that the IRS not enforce the ACA penalty for not having insurance.  The IRS has recently stated that it is still their position to enforce the penalty and not accept tax returns that do not include information as to whether or not the tax payer has insurance or not.

Unfortunately for many yacht crewmembers the global policies offered are not ACA compliant. If the yacht crewmember owns and individual policy they will need to contact their insurance agent to confirm if their policy is ACA compliant or if the insurance is employer provided the crewmember will need to contact the yacht payroll processing company and inquire if the group policy is ACA compliant.  In my experience most luxury yachts owned by Americans that  provide health insurance have amended their policies to become compliant however I still recommend the crewmember inquire to as to be certain.

It should be noted that the ACA has several exemptions, one of those exemptions being for citizens living outside the United States and qualifying for the foreign earned income exclusion.   I would caution crewmembers to research this exemption before liberally applying to their individual situation.  As with tax compliance living abroad generally means you are living as a resident in a foreign country not living on a foreign flagged vessel as it cruises through international water and the territorial waters of foreign countries.  If you feel you are eligible for one of these exceptions I would recommend you speak with a health insurance provider to clarify.  There is also recourse for individuals that are unable to obtain health insurance due to “hardship”, if for some reason you feel that a hardship will prevent you from obtaining health insurance I recommend you contact a health insurance expert to assist you with this process.

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