There’s a lot going on that impacts yacht owners, captains and crew with respect to health insurance. There’s the MLC 2006, which addresses commercial (charter) vessel health care requirements on a global scale and the Affordable Care Act (ACA), which applies to U.S. taxpaying crew. Both of these new pieces of legislation are misunderstood and rumors abound, so let’s try to sort out the facts.
The MLC 2006 does not require yacht owners to provide crew health insurance carte blanche. What it does say, in short (as really has always been the case), is that if a crew member is sick or injured while in service to the vessel, the vessel owner is responsible to make sure that crew member receives medical care at no cost to the crew member.
There are some limited insurance requirements (or rather “financial security must be obtained”) under MLC 2006 as it pertains to crew, but they are essentially death or permanent disability from accident or occupational illness and repatriation.
The challenge with MLC is that it does not dictate the amount that should be paid in the event of death or permanent disability, therefore each flag state may need to be consulted. The language you use in your Seafarers’ Employment Agreement (SEA) is critical because it is easy to create a situation where the yacht owner is contractually obligated to pay a sum that potentially is not insured against, or where no sum is actually defined.
The bottom line on MLC 2006 is that it does not change the need for individual crew members to make sure that they have adequate health insurance that meets their specific needs.
So what about the ACA? How is that impacting the yacht crew insurance world?
The ACA, like MLC, remains somewhat vague in exact language. But the main point to understand is that for yacht crew who are U.S. taxpayers, you will be required to prove to the IRS that you have a health insurance plan that they say satisfies the requirement.
The current challenge is that no guidance has been given on this as it relates to whether any insurer that is located outside the U.S., as many yacht crew insurance carriers are, has any plan that the IRS considers to be satisfactory.
So for now, captains and crew who want to be assured that they are in compliance with the ACA, the only way to do so is to purchase an insurance plan from a U.S. carrier. You have until the end of March 2014 before the IRS will start to consider you as being out of compliance and potentially subject to penalty (first year is $95 or 1 percent of your income, whichever is higher).
The IRS can check this because every U.S. insurer is required to report to the IRS every person it insures via their social security number. This then, theoretically, would be cross referenced to each taxpayer’s filing to see whether he or she is in agreement, just like it does with a person’s income reported on their W-2s or 1099s.
But will you be audited? Have you ever been audited before? It’s a question that people who currently do not have or cannot afford health insurance are contemplating.
For crew, the question changes slightly. As a crew member, if I’m going to be in the U.S. less than half the year, why should I bother buying a plan that I’ll probably never use when I already have my own non-U.S. insurance carrier policy that works fine wherever I am?
We are hopeful that the IRS will someday agree that it makes sense to accept comprehensive non-U.S. insurer plans as being not only compliant, but best suited to people who spend most of their time outside the U.S.
In the meantime, for all U.S. crew, what you need to be aware of is that unless you work on a vessel that is U.S. flagged and you have more than 50 crew, your employer is not responsible for providing you with an ACA-compliant health insurance policy.
In fact, regardless of your nationality, tout on your resume or CV that you already have your own health insurance when you are job seeking. Not only does this establish you as a person who understands that you are responsible for your own existence, but it also makes you more employable.
The current status and future implications of MLC and the ACA are being monitored carefully by those who provide insurance to the yachting community, and it’s important that you stay informed.
Mark Bononi is director of the yacht division of MHG Insurance Brokers in Ft. Lauderdale. Contact him at 954-548-3576. Comments on this column are welcome at firstname.lastname@example.org.