Healthcare in the U.S.
A Guide to Navigating America’s Complex Healthcare System
The U.S. has an unusual healthcare system compared to many other Western countries. It does not have a standardized or uniform healthcare system and does not provide universal healthcare.
Rather, healthcare is paid for with a combination of private funds, U.S. households and private businesses. In recent years legislation was introduced that mandates coverage for almost all Americans.
Healthcare facilities in the U.S. are amongst some of the best in the world. As a nation, the U.S. boasts some of the most highly-trained specialists and many of the most technologically advanced medical facilities – but they come at a cost.
Healthcare is one of the most expensive items in the average American’s budget, and collectively they pay a massive $3.4 Trillion per year in healthcare costs. It has also become steadily more expensive in the last few decades with expenditures relative to GDP rising from 6% in 1970 to nearly 18% by 2015. In 2016, the average American household spent $4,612 on healthcare, representing 8% of the total average household expenditure of $57,311.
Most U.S. citizens get their healthcare coverage either through an employer as part of their employment package or by buying an individual plan.
As an expat, you are not required to buy health insurance – but you definitely should. Costs of care without insurance can be incredibly high, and while you can access emergency treatment without insurance, you will be asked to pay for it afterwards. For some people, this can lead to medical bankruptcy.
As an expat, in most cases, you will not be eligible for healthcare assistance programs such as Medicare and Medicaid unless you are a U.S. citizen. You may also in some circumstances struggle to find medical treatment without insurance – so it really is essential you have this base covered when relocating to the U.S.
There are two main ways to obtain health insurance in the U.S. – Via a group health insurance plan offered via an employer or by buying an individual health insurance plan. As an entrepreneur, you will probably be looking at buying an individual health insurance plan.
There are four main types of health insurance that you can buy as an individual, and each one varies in cost and the types of services it covers and where you can get those services:
Fee-for-Service is a traditional healthcare policy. You pay a monthly fee (a premium) and the health insurance company you have bought your insurance from pays for services such as doctor’s visits and hospital bills. This type of insurance offers you the most choice when it comes to doctors and hospitals. You can choose whichever doctor you would like to use and change doctors at any time.
You pay a ‘deductible’ each year – an amount for each member of your family on the plan and once this is paid you share the fees towards your health care with the insurance company – this is known as ‘coinsurance’ and is often around 20/80 (with you paying the 20%.)
Most fee-for-service health plans have a cap of how much you will be expected to pay for your care per year. You will need to fill out insurance forms to make a claim on these types of plans and provide receipts for all treatment and medication.
HMO: Health Maintenance Organization is a prepaid healthcare plan. You pay a monthly premium and the HMO provides comprehensive medical coverage for you and your family. This includes doctor’s visits, hospital stays, medical tests and medication.
Your care under a HMO has to come from the group practices run by the HMO or by healthcare professionals who have a contract with the HMO to provide service. In most cases, you will be limited to these facilities and healthcare professionals, although there can be exceptions in a medical emergency.
You do not have to pay a deductible each year for a HMO but may have to pay a small co-payment such as around $5 for a doctor’s visit and $25 for emergency room treatment. One of the advantages of a HMO is that because they receive a fixed fee for all your medical expenses it’s in their interest to promote preventative treatment as much as possible.
It also has the advantage that you do not need to fill out lengthy forms for your treatment; you can provide your HMO card instead when you go to the hospital or doctors. You may, however, have to wait longer for medical appointments than you do when using a fee-for-service plan.
POS or point-of-service plans are a kind of HMO plan where primary care doctors can make referrals to other providers in the health plan. Members can also refer themselves outside of the POS plan, provided you pay coinsurance.
PPO or Preferred Provider Organizations is a combination of a HMO and a fee-for-service plan. There are a limited number of doctors to choose from, but when you use them almost all of your medical bills are covered. If you go to these providers you can give your card rather than fill out forms.
You can go to doctors outside the PPO but you will pay a larger portion of fees yourself and have to fill out insurance forms.
International Health Insurance
If you are in the process of relocating to the U.S. it can be worth using an international health insurance plan, which can provide you and your family with coverage internationally. You might want to invest in a Global insurance plan which covers the U.S. This will be more expensive than other global plans that exclude the U.S. due to the high cost of healthcare in America.
These plans will give you a choice of where you want to be treated as well as a choice of payment options between EUR, GBP and USD. International insurance now has to adhere to ACA (Affordable Care Act) regulations. For more details on ACA please see below.
The cost of your healthcare will vary depending on where you live in the U.S. and the type of plan you decide to take up.
The average health costs for single coverage premiums tend to be around $440 per month and for family coverage $1,168 per month. During 2018 the average cost of single coverage increased by 3% and for family coverage 5% compared to 2017.
Premiums can also vary in price due to your individual needs, but can include five key factors:
- Age:Premiums can be up to 3 times higher for older people than for younger ones.
- Location:Where you live has a big effect on your premiums. Differences in competition, state and local rules, and cost of living account for this.
- Tobacco use:Insurers can charge tobacco users up to 50% more than those who don’t use tobacco.
- Individual vs. family enrolment:Insurers can charge more for a plan that also covers a spouse and/or dependents.
- Plan category:There are five plan categories – Bronze, Silver, Gold, Platinum, and Catastrophic. The categories are based on how you and the plan share costs. Bronze plans usually have lower monthly premiums and higher out-of-pocket costs when you get care. Platinum plans usually have the highest premiums and lowest out-of-pocket costs.
(Source: healthcare.gov website https://www.healthcare.gov/how-plans-set-your-premiums/)
In the last few years, there have been changes to the way health care is provided in the U.S. Most of these changes were introduced via the Affordable Care Act (commonly known as ‘Obamacare’) and went into full effect in 2014.
The ACA was introduced with the aim of making health insurance more comprehensive across the U.S. and it requires people to have health insurance for at least 9 months out of every 12 or be subject to a tax. This tax is generally 2.5% of your income. In December 2017 the Trump administration repealed this tax, effective in January 2019.
One of the features of the ACA is to prevent insurance companies from excluding people with pre-existing conditions or dropping people from plans when they become sick. Insurers must provide care based on 10 key health benefits such as maternity care, wellness & preventative visits and mental and behavioral health treatment.
If you are a non-Us citizen and traveling to the U.S. on holiday or to visit friends & relatives you do not need ACA coverage, however, you do need to ensure your insurance is ACA compliant if you are a green card holder or using a H1 Visa.
The ACA also means that employers who have more than 50 employees must provide health insurance to at least 90% of full-time employees or pay a fine.
Do I have to Provide Health Insurance Coverage to Employees?
If you have over 50 full-time employees you are required to provide health insurance for full-time employees, or pay a tax penalty. This is called the ‘employer mandate’. If you have less than 50 full-time employees you are not required to provide healthcare, but if you choose to do so you may be eligible for some tax benefits.
It’s worth doing your research into these costs as you plan how you want to expand your business into the U.S.
The Trump Administration & Obamacare
Since the Trump administration came into effect there has been a lot of confusion about how ACA is or will be affected. Donald Trump came to office under the mandate of dismantling Obamacare, however by late 2018 for the most part, the ACA law has continued to be enforced as written.
From October 2018, some health insurers have been able to offer short-term coverage that is cheaper and less comprehensive than Obamacare cover. These plans can reject people based on pre-existing conditions and are exempt from Obamacare limits on out of pocket expenses – so do your homework before applying for one of these plans.
In general ACA compliant plans seem to remain one of the best choices when it comes to health care in the U.S. However the political landscape has fluctuated significantly since President Trump took office, so it’s worth staying up to date on changes and regularly researching healthcare options.
The Government has created a website specifically to assist citizens with finding and applying for health insurance – click here for further information.
Frequently Asked Questions (FAQs) About Taxes, Company Formation, and Residency in the U.S.
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