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Michael Cahill

The Solopreneur’s Guide to the Affordable Care Act

By: Michael Cahill | December 23, 2013 | 
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The Solopreneur's Guide to the Affordable Care ActBy Michael Cahill

Many solopreneurs and independent business owners traded in their corporate benefits to pursue a more independent lifestyle.

While the independent business lifestyle can mean things like being able to set your own hours and work from wherever you want, it can also come at the price of perks such as health insurance.

Looking at the poll numbers, Americans generally support the concepts of the Affordable Care Act (ACA) because it makes health insurance more affordable and accessible for low-income Americans.

Yet there is one problem that especially affects solopreneurs and small business owners.

The subsidy amount is calculated based on the amount of income you estimate you will make in the upcoming year as part of the application process.

Solopreneurs and freelancers don’t always have a good way of forecasting future income.

You could end up bringing home far less than you anticipated — or far more.

The consequences for incorrect income projection vary whether your income grows or shrinks against projections in the following year.

The Individual Mandate: The Negative Side of the Affordable Care Act

Many cavalier solopreneurs opted out of having health insurance altogether, partially because costs could be very high for the self-employed. With the implementation of the ACA, you can still choose to not be covered but prepare to pay a hefty penalty for doing so.

In the year 2014, the penalty for not carrying insurance will be $95 per adult or one percent of income.

In 2015, the amount jumps to $325 per adult or two percent of income.

Take the penalty for a third year and be prepared to shell out $695 per adult or two and a half  percent of income.

Longer periods of time spent uninsured will result in higher penalties year-over-year, adjusted to match inflation.

Access to Essential Benefits: The Positive Side of the Affordable Care Act

To be sure, the thought of being financially penalized for choosing to not purchase health insurance might seem unfair. That penalty is in place to make sure people buy health insurance to maintain the system.

All insurance plans are federally required to provide essential medical benefits across 10 categories.

The medical services provided in these categories will vary from state to as each state is able to choose their own “benchmark plan,” a selection of benefits each state has mandated to be essential. These benefits are the minimum standards, which for many people are far better than the standards of coverage they were used to – none at all.

Refer to this list to find your state’s benchmark plan.

For the Independent Business

That’s all well and good for the solopreneurs, but what about the independent business owners?

The process described above largely applies to business owners as well. Eligibility for subsidies is still income-based.

The differences arise when you have people employed in your business. In addition to the individual mandate, the Affordable Care Act also has an employer mandate that takes effect starting in 2015.

It doesn’t apply to all businesses — only those who employ 50 or more people who work at least 30 hours a week.

If that is the case then you have to provide them with an affordable health insurance option or pay a big penalty of $2,000 per employee after the first 30 — or a minimum of $40,000.

Businesses with fewer than 50 full-time employees aren’t required to offer health benefits, though those with fewer than 25 full-time employees are likely eligible for substantial tax credits to ease the cost of providing health coverage.

How Will the ACA Work for You?

The Affordable Care Act has been nothing if not controversial on both sides of the political line since its implementation, and the controversy has been on the rise since the lackluster launch of the health insurance exchanges.

If you are shopping for new insurance as a small business owner or as a solopreneur, research your options fully.

About Michael Cahill


Michael Cahill is the editor of the Vista Health Solutions blog. He writes about the healthcare system, the health insurance industry, and the Affordable Care Act. Follow him on Twitter at @VistaHealthMike.

7 comments
Howie Goldfarb
Howie Goldfarb

Took me 2 hours yesterday but got me my Obamacare and yes it is challenging not knowing your income stream. But hay to have insurance again after 5 years without it.

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belllindsay
belllindsay

I learned a ton from this post. Of course, I'm Canadian. But STILL! LOL Nice work. 

kevinanselmo
kevinanselmo

Thanks for this post. I just went out on my own - the biggest hurdle was figuring out the health insurance equation for my family. I get health insurance through my previous role for another month and then need to decide how to proceed. Fleshing out the beginning part of this post - how do you actually estimate income as a solopreneur? I called the ACA number a few months ago and asked this question to the representative, noting that my salary could fluctuate wildly. The person on the other end of the phone seemed to have no idea how to answer this. Would be great if anyone had insights to share about this. Thanks!

LauraPetrolino
LauraPetrolino

This is such great information about a topic that is super scary to most independent business owners. And like @ClayMorgan said below, way too much 'information' out there is heavily veiled in political overtones and debate. This is a great clear cut overview of what you need to know!

ClayMorgan
ClayMorgan

Well done. Sometimes we need to sort through the politics and debate and just figure the darned thing out.

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Howie Goldfarb
Howie Goldfarb

@LauraPetrolino@ClayMorganwell there is more to it than just that. I just signed up for Blue Cross Blue Shield in Vermont. I had a choice of 2 providers. Small state. Small choices. What was interesting is my policy had 94 pages. The competing one cost a bit more had higher deductibles but only had 9 pages. And ironically neither was in English! Co Pays. Co Insurance. Max out of pocket. etc.

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jasonkonopinski
jasonkonopinski

@ClayMorgan Indeed. I was amazed how many businesses went into "blame mode" before a single piece of the ACA was actually implemented.