What Self-Employed People Need to Know About Affordable Care Act Enrollment

3 minute read

Yahoo Small Business recently spoke with Mike Stahl, senior vice president at HealthMarkets, about how employers with fewer than 50 employees—those not required by law to offer health insurance to their employees—can leverage the Affordable Care Act as an employee benefit.

Here, we continue the conversation with Stahl to address what self-employed solopreneurs and freelancers need to know about the pending Affordable Care Act enrollment deadlines.

YSB: What Affordable Care Act health insurance deadlines does the self-employed person without employees need to be aware of?

Stahl: Self-employed people such as solopreneurs and freelancers are purely in the regular individual market. Group insurance is not an option for them. Open enrollment opens for them November 15 and continues until the last day of February, 2015.

Plans that do not meet the minimum ACA standards are being cancelled at the end of this year. Self-employed people who have been covered by one of those should enroll in an individual plan on the exchange by December 15 to avoid being exposed. If you enroll after December 15 but by January 15, your policy will become effective February 1. The final enrollment period is until February 15 to have a policy effective March 1. Getting coverage by March 1 means you will have been covered for at least 9 months of the year and there will be no tax penalty.

YSB: Do self-employed people who had already enrolled in an ACA insurance plan need to do anything now?

Stahl: If you are insured under an ACA plan and you qualified for subsidies in 2014, you need to re-enroll either in the same plan or consider switching. You can do this between November 15 and December 15.

The process was set up so that if you don’t re-register for subsidies you will be receiving the wrong ones. When you applied last year, you would have answered a question during that long application process you went through with an insurance agent or on your own: “Do you permit the IRS and Treasury Department to look at your tax records to determine your subsidies for the next 5 years?” If you did not check that box last year, your policy will automatically be renewed, but when you wake up January 1 your subsidies will be gone.

The average nationwide gross healthcare insurance premium was around $5,000 for the year. The average subsidy was $4,000 for the year. So individuals were paying about $100 a month. This year, the average policy rate is increasing up to 10 percent. That means that if your gross premium goes up from $5,000 to $5,500 and you do not re-register, you will get a bill for the first month’s premium: one-twelfth of $5,500—that’s $458 instead of $100. You’re going to freak out.

You could get things trued up when you file your taxes in April 2016, but that’s a long time to wait to reconcile a big cash flow problem.

YSB: OK, what if someone did check the box to permit the IRS to look at their tax records and determine their subsidies?

Stahl: If those people do not re-register by December 15, then when they wake up January 1 they will still be insured, but their subsidy will remain at the same dollar amount it was in 2014. In other words, if they were getting a $333 per month subsidy toward a monthly premium of $416 but their policy rates increase by 10 percent, they will be seeing bills each month that are $41 greater.

They should go back into the system after November 15, 2014, and actively re-determine their subsidy. Insurance rates are going up for 2015, so most subsidies will also go up, though that is hard to determine because subsidy calculations are based on income and the benchmark plan in your area.

YSB: And what about people who paid a tax penalty because they had no insurance last year?

Stahl: The penalty is doubling next year.

YSB: Could free agents do better by joining a group insurance plan such as through the Freelancers’ Union?

Stahl: It’s unlikely that those plans are a better deal than being insured as an individual on the exchange, because group plans are nonsubsidized. Group rates are, generally speaking, the same as individual rates, or even higher.