You and the Health Insurance Marketplace
On Oct. 1, the Health Insurance Marketplace opens for business, providing a place where the nation’s 48 million uninsured can shop for coverage. The Marketplace is the key component of the Affordable Care Act (ACA), aka Obamacare, which aims to provide health coverage for a majority of the nation’s uninsured. But this change doesn’t just affect the uninsured. It could also affect you if you’re covered through work, own your own business (large and small) or if you’re freelancing.
Policies sold through the exchange will be discounted for single people who earn between $11,490 and $45,960 and families of four that earn $23,550 to $94,200. Most people who are uninsured today will be able to purchase coverage for $100 or less per month, according to estimates from the U.S. Department of Health and Human Services. To get an estimate of your premium costs through the exchange, check out the Kaiser Family Foundations’ Subsidy Calculator. Options will vary depending on where you live.
If you are currently uninsured and can afford health insurance, you are required to purchase a plan or face a tax penalty. (Healthcare.gov provides a list of exemptions to this rule, such as economic hardships and religious objections.) In 2014, that fee will be 1 percent of your income or $95, whichever is higher. The fee for uninsured children is $47.50 per child. The penalty amount increases annually.
If You’re Insured Through Work
If your health insurance is provided by your employer, you probably won’t need the marketplace. By Oct. 1, your human resources department was required to inform you of whether your plan provided the minimum essential coverage and met the affordability guidelines established by the ACA. What does that mean? Specifically, your employer must cover at least 60 percent of plan cost and your out-of-pocket cost can be no more than 9.5 percent.
If your employer does not meet those minimums, you could qualify for subsidies through the Health Insurance Marketplace that could mean lower premiums for you if you switch plans. If your employer’s plan does meet the threshold for affordability, you could still shop for coverage on the exchange, but it will likely be more expensive for you since your current plan’s status makes you ineligible for tax credits that help pay for coverage.
If You’re Self-Employed
If you’re a sole proprietor with no employees, you are eligible to shop for coverage on the exchange. If you’re currently insured, you can choose to keep your current plan if it still has grandfather status, which means the coverage hasn’t changed since the ACA was passed into law in 2010. But if your plan has lost grandfather status, it must meet the minimum essential coverage requirement to help you dodge the tax penalty. That requirement means that your insurance must cover ER visits, hospitalization, maternity and newborn care, prescription drugs and preventive and wellness services.
“There are 23 million self-employed people in America,” says Katie Vlietstra, Director of Government Affairs for The National Association for the Self-Employed (NASE). “Half of them will be looking for coverage on the exchange. Our members want affordable comprehensive health insurance, but they also want the flexibility they need to manage their budgets. The fear is that the essential health benefits will inflate the cost of health insurance.”
The other concern is over subsidy eligibility. If you earn between $11,490 and $45,960 for a single person and $23,550 to $94,200 for a family of four, you would be eligible for a tax subsidy that caps your out-of-pocket costs to between 2 to 9.5 percent of earnings, depending on your income. If you earn less than $15,415 annually, you would qualify for Medicaid, but only if you live in a state that opted to expand the program to newly eligible enrollees. Income is determined by your modified adjusted gross income, a measure that includes business income but deducts self-employed expenses.
If you qualify for subsidies or Medicaid based on your prior year earnings, but then have a banner sales year that pushes your income above the eligibility point, you could wind up owing that money back at tax time.
“You want to have a successful business and make more money,” says Vlietstra. “But that push-pull of ‘Do I take the premium assistance upfront or wait and take it at the end of the year after expending it out of pocket?’ is going to be a difficult one.”
If You Employ Fewer than 50 People
Small businesses are not required to offer health insurance to their employees. But if they do, they will be able to look for coverage on a new marketplace called SHOP (Small Business Health Options Program), which is expected to provide lower-cost coverage than employers can currently find on the private market. There are some delays with the opening of the SHOP marketplace, and not all companies will be able to access it in October. But the federal government says that by November, access should be nationwide.
Employers with fewer than 25 employees who provide coverage qualify for a Health Care Tax Credit if their employees’ salaries average below $50,000 and they contribute 50 percent or more toward their employees’ plans.
“I think the tax credits will be helpful to the employer who already provides health care or is looking for more affordable ways to do so,” says Sharon P. Stiller, director of the employment law group at the firm Abrams, Fensterman in New York. “People want to do well by their employees. But everyone is concerned about potential premium increases.”
If you don’t provide coverage, your employees will be eligible for tax credits through the exchange if their incomes are within the allowable limits ($11,490 to $45,960 for a single person and $23,550 to $94,200 for a family of four). Employers who in the past could only offer high-deductible plans might find that their employees would be better served by a policy through the exchange, since they are all required to offer a minimum benefits package that include hospital, ER and maternity services.
“Business owners need to plan because this is new territory,” says Stiller. “They need to walk into this with eyes wide open so they can take advantage of potential options to reduce cost or the ways to provide meaningful coverage for employees.”
If You Employ More than 50 People
Businesses with more than 50 employees are considered large companies, and starting in 2015, you will have to offer affordable insurance or pay an “Employer Shared Responsibility Payment.”
If you don’t provide insurance at all, your annual payment will be $2,000 per full-time employee (excluding the first 30 employees). If you do offer coverage but the insurance doesn’t meet the minimum requirements – meaning you don’t pay at least 60 percent of plan cost – then you have to pay $3,000 per full-time employee who qualifies for subsidies through the exchange.
If you already provide coverage that is affordable, your employees won’t be eligible for subsidies through the exchange, a point that is meant to encourage them to remain insured under your plan.