Below is a guest post from Michael Cahill, editor of the Vista Health Solutions Blog. He writes about the healthcare system, health insurance industry and the Affordable Care Act. Follow him on Twitter at @VistaHealthMike.
Freelance marketers trade away the tidy perks of the corporate world, like health insurance, for greater lifestyle freedom.
That said, with the Affordable Care Act (ACA) now in full swing, self-employed professionals need to have a firm grasp of the legislation. Why? Because the law is making big changes to the American health insurance system at large, many of which directly impact freelance marketers.
The Cornerstone Of The ACA: Tax Subsidies
One of the big selling points of the ACA is the availability of federal health insurance subsidies for plans sold at the health insurance exchanges. Individuals and families with annual incomes between 100% and 400% of the Federal Poverty Line qualify for subsidies. For an individual, this is about $10,000 to $40,000 a year, or $29,326 to $88,200 for a family of four. If you are near the top of that range, your premiums are capped at 9.5% of your income for a Silver level (mid range) plan sold at the exchange.
One of the quirks of the exchange subsidies is that their amount is based off your projected income for the coming year. This means that during the application process, you are asked to estimate how much you think you’ll make in the coming year. If the amount you give qualifies for a subsidy, your subsidy is based off that projection.
But you have to be aware that projecting your income incorrectly does have consequences. If you overestimate your income and make less money than you thought you would, you can actually end up with extra subsidy money when you file your taxes for the year. That is to say, you’ll get the subsidy difference between your projected income and what you would have gotten had you estimated your income more accurately.
On the other hand, if you underestimate your income and receive a bigger subsidy than you should have, you’ll need to pay back any extra subsidy money you received. So make sure to be careful and methodical in your predictions. Don’t make them haphazardly, or you could end up having to pay back much more than you’d like to during tax season.
The Bad: The Individual Mandate
In the past, you may have opted to not have health insurance at all, just hoping you don’t get yourself in any terrible medical situations. The individual mandate doesn’t mean you have to get insurance, but it does mean that if you don’t, you will face a penalty.
In 2014, the penalty will be $95 per adult or 1.0% of family income; in 2015, it is $325 or 2.0% of income; and in 2016, it is $695 per person or 2.5% of income. Beyond that the penalty continues to rise annually. The bigger of these two numbers is the one you will be charged. As you can see, being without insurance in 2014 won’t drain your wallet, but it quickly becomes more expensive to be uninsured in the coming years.
The Good: The Essential Health Benefits
While the news of the individual mandate is probably fairly painful to hear, on the bright side there are the essential health benefits. All plans are now be required to provide medical benefits across ten big categories of healthcare known as the essential health benefits (EHBs). These categories include everything from emergency services to prescription drug coverage.
The actual medical services that fall into these categories are pretty vague from a federal standpoint. Each state gets to decide what the essential benefits are within their borders. They’ve done this by picking one existing plan to be the so-called “benchmark plan.”
The medical services covered by a state’s chosen benchmark plan are the minimum standards for every health insurance plan sold in the state going forward. Of course, this means that what actually constitutes an essential benefit will vary from state to state. To get a look at your state’s benchmark plan and EHBs, check out this list at CMS.gov.
How Will This Work Out For You?
There is no doubt the ACA has been controversial since it was first signed into law. Now that it has actually arrived, that controversy has increased quite a bit, especially considering all the hiccups that the online health insurance exchanges are having.
You may hate the ACA, or you may love it. It may have a small effect on your health insurance situation, or it could be a big change for the better or the worse. The only really way to know is to do your research, visit the marketplace and compare plans.
