Health Insurance for American Retirees in France. How does it work?
The government universal healthcare insurance program in France is guaranteed to all American retirees who are permanent residents, a program known as PUMA[1]. Health coverage in France is usually considered to be excellent and a universal health coverage means that health care, prescription drugs, vaccines and medical screenings are far less expensive than in the United States. The premium one pays is based on a person’s ability to pay, not preexisting conditions, a set premium amount or age. The premium is actually based on your realized capital gains and income from investments, whether portfolio investments or rental income. Pension or retirement income such as social security, state government retirement plans or IRA distributions are not included. As a financial advisor to Americans in France, this premium impacts the way in which we design investment portfolios.
The plan is compulsory, even if you have your own private health insurance, and everyone in France participates. So even if you never worked in France or contributed to the system, you must have the universal coverage. There is no age limit as to when you join, so you don’t need to join before the age 65, for example. The health coverage takes effect three months after you are a legal resident in France, although you still must actually apply for coverage before you can claim a reimbursement and unfortunately, nobody will inform you of this.
For the calculation of the premium, there is an income floor or abatement of 20,568€ for 2022 (the maximum income assessed is 329,088€). After that you pay a tax equivalent to 6.5%. The premium is based on what you report on your French income tax declaration, so even if you don’t pay capital gains or income taxes in France, the amount you earn in the US, for example, is still reported in France. You don’t actually calculate the amount of taxes due. The French government does based on your declaration and sends you a bill. You can find more information here.
While understanding how the calculation is made is perhaps interesting, it does brings up several important points in portfolio design, for an American citizen, which are not always considered by advisors, particularly if those advisors are based in the United States. First, investment portfolios for Americans in France should be designed to maximize risk adjusted after-tax returns. As a French resident and U.S. citizen, you are subject to two different tax systems and in the investment arena, you often get to choose. So your portfolio management should be based on maximizing the tax benefits from either of the two systems. And a French resident portfolio may look very different than one for an Italian or Spanish resident. That is because the tax treaties for each country are very different. There is no one size expat fits all. In France, you try to earn capital gains where they would be taxed the least, or are expected to earn enough to offset higher capital gains rates in either France or the US and you should actively manage the capital gains during the year by offsetting capital gains and losses. No longer is it just the capital gains tax that comes must be considered, but also, the premium on your French health insurance.
1 December 2022
[1] Protection universelle maladie