The Affordable Care Act: What freelancers need to know

Are you confused, are you procrastinating, or do you think the Affordable Care Act requirements are not going to be “real” for at least another year?

Think again…

Here are the highlights of how the ACA affects you, as an Independent Consultant:

  • If you don’t have health coverage at all in 2015, you may have to pay a fee
  •  If you can afford health insurance but choose not to buy it, you must pay a fee (penalty).
  • If you are self-employed, running an income-generating business with no employees, you may get coverage through the Health Insurance Marketplace for individuals. You may not obtain coverage through SHOP (Small Business Health Options Program), which is open to employers with 50 or fewer full time equivalent employees.
  • If you or your dependents have healthcare insurance, but not insurance that qualifies as “minimum essential coverage”, you’ll pay a penalty.

Minimum essential coverage (MEC) is the type of coverage an individual needs to have to meet the individual responsibility requirement under the ACA.

The penalty you will pay for not having MEC will be either a % of your household income or a flat fee, whichever is higher.

The fee in 2015 is:

  • 2% of your yearly household income

-OR-

  • $325 per person for the year ($162.50 per child under 18); maximum penalty is $975

The penalty increases every year and will be adjusted after the year 2016 for inflation. The penalty is paid when you file your Federal tax return for the year for which you were seeking coverage. If you don’t pay the fee, the IRS will hold back the amount of the fee from any future tax refunds. There are no liens, levies or criminal penalties for failing to pay the fee. The rules for paying penalties are the same whether the Marketplace is run by your State or by the Federal government.

The following are Minimum Essential Coverage plans considered covered under the health care law and don’t have to pay a penalty:

  • Any Marketplace plan, or any individual insurance plan you already have
  • Any employer plan (including COBRA plans, with or without “grandfathered” status)
  • Retiree health plans
  • Medicare
  • Medicaid
  • The Children’s Health Insurance Program (CHIP)
  • TRICARE (for current service members and military retirees, their families and survivors)
  • Veterans healthcare programs
  • Peace Corps Volunteer plans
  • Self-funded health coverage offered to students by universities for plan or policy years that begin on or before Dec. 31, 2014

If you have only the following types of coverage, these may not qualify as minimum essential coverage and you may have to pay the fee:

  • Coverage only for vision are or dental care
  • Workers’ compensation
  • Coverage only for a specific disease or condition
  • Plans that offer only discounts on medical services

The following are 4 ways you can buy a minimum essential coverage healthcare plan:

  • Directly from an insurance company
  • With the help of an insurance agent or broker
  • From a commercial online health insurance seller
  • Through the Health Insurance Marketplace (Exchange) (healthcare.gov)

Based on your 2015 household size and income, you may qualify for Premium Tax Credits that lower what you pay in monthly premiums. (see www.healthcare.gov for limits). You can apply part or all of this tax credit each month to your premium payments.

Advance Payment of the premium tax credit means the Marketplace will send your tax credit directly to your insurance company, so you pay less for your premiums each month.

Per the IRS, in general, you may be eligible for the Premium Tax Credit if you meet all of the following:

  • Buy health insurance through the Marketplace;
  • Are ineligible for coverage through an employer or government plan;
  • Are within certain income limits;
  • Do not file a Married Filing Separately tax return (unless you meet the criteria in section 1.36B-2T(b)(2) of the Temporary Income Tax Regulations, which allows certain victims of domestic abuse and spousal abandonment to claim the premium tax credit using the Married Filing Separately filing status); and
  • Cannot be claimed as a dependent by another person

You may also be able to save on Out-Of-Pocket costs, including deductibles, copays and coinsurance (“cost-sharing reductions”).  

This again is based on household size and income.

If your income falls between the amounts designated in the chart listed on the www.healthcare.gov site, health insurance companies must lower how much you pay Out-Of-Pocket when you receive medical care.

This does apply only if you are enrolled in a plan in the “SILVER” category (refer to the www.healthcare.gov site)

However, if your estimated 2014 income is above $46,680 for an individual or $95,000 for a family of 4, you generally will not qualify for these lower costs (premium tax credits or OOP savings).

 

A couple of other things to remember:

If you’re unemployed, you still must have minimum essential coverage regardless of your employment status. However, there are certain qualifying exemptions. And it depends upon your household income.

If insurance is unaffordable based on your income, you may qualify to be exempt.

Another exemption from the penalty for not being insured, that you may qualify for, is if you’re uninsured for less than 3 months of the year.

You must complete and submit an application to determine if you qualify for an exemption from the fee.

 

Bottom line: Don’t put it off any longer…2015 is right around the corner!

 

 

Sources:

Health Insurance Marketplace www.healthcare.gov

IRS www.irs.gov