Breathe easy. American citizens living full time in Asia will not be required to purchase health insurance.

While the health care reform bill approved Sunday by the House of Representatives will affect many expatriates, the most-discussed provisions – the mandate to obtain insurance coverage, and the penalties imposed upon people who do not – will apply primarily to US citizens who live within the 50 states.

The bill, which President Barack Obama announced he would sign into law immediately, creates a coverage mandate. Specifically, the bill adds a new provision to the tax code which mandates that every US citizen obtain "minimum essential coverage" or be fined. But, as is often the case with complex legislation, the definitions exclude as much as they include.

In what will be the new Section 5000A (f)(4) of the Internal Revenue Code, Congress declares that expatriates "shall be treated" as having minimum essential coverage. Thus if you are an expat, it doesn't matter whether you actually have health insurance or not. Congress says you do.

But only full-time expatriates are off the hook. To avoid the insurance coverage mandate, an expat must qualify for the IRS' foreign earned income exclusion, the beloved loophole which says that expats do not have to pay federal income taxes on their first $91,500 of overseas income this year. The IRS has tight rules for who qualifies: an expatriate must establish a tax home in the new country and must either be a bona fide resident of the adopted country for an entire tax year or spend a minimum of 330 days per 12-month period outside of the United States. But if that's you, the new law will not obligate you to purchase health insurance.

Residents of the United States' Asian territories have it easier. In order to avoid the health insurance requirements, residents of Guam, American Samoa and the Northern Mariana Islands (as well as Puerto Rico and the US Virgin Islands) need reside in those territories for only 183 days per tax year while having no other tax home.

Now comes the sore point. If you are compensated highly enough, you will have to pay for the new health care laws even though they don't apply to you.

The new law will raise the Medicare payroll tax – which, if your employer is a US firm, is usually payable on all worldwide wages -- by 0.9 percent (to a total of 2.35 percent) on wage earnings of more than US$200,000 a year for individuals and more than US$250,000 for joint filers. Those are healthy incomes, but expatriates are not covered by Medicare, which will only pay for medical treatment within the United States. The US government is asking affluent expats – or their companies -- to pay into a program which the government prevents them from using.

The so-called "Cadillac tax" is a surcharge imposed on employers on the value of higher-cost employer-provided health insurance policies, those which, generally speaking, cost the employer more than $708 a month for individuals or $1,916 a month for families.

There's nothing in the text of the bill which limits the geographic reach of the Cadillac tax or which exempts Americans who receive such coverage from overseas employers. While the tax would be difficult to collect from employers operating wholly outside the United States (and may be unconstitutional as applied to them), the bill is vague on this point, which is an invitation to litigation.

None of this starts tomorrow. The health insurance mandate is not imposed until 2013 or 2014, depending on the tax year used by the taxpayer. The Medicare tax hikes commence in 2013, as does the Cadillac tax. Expats have time to consult with their accountants, tax preparers or attorneys in organizing their affairs in the most tax-efficient manner.

Moreover, Congress isn't done. Although the bill passed on Sunday will soon be law, Congressional Democrats are pushing a reconciliation bill to alter the freshly signed law, including attempts to change the scope of the Medicare tax and the effective date of the Cadillac tax. Republicans vow to oppose or amend, and the Republicans also vow to repeal the legislation if they take back control of the government.

The principal takeaway for full-time American expats in Asia is that, as the law is currently written, they are not required to purchase health insurance so long as they qualify for the foreign earned income exclusion or are residents of a U.S. territory. But this health care reform will be expensive, and expats will ultimately receive part of the bill.

Paul Karl Lukacs is an attorney who blogs about travel and expat issues at www.knifetricks.blogspot.com.