Self-Employed People Seeking Health Insurance & Their Legal Options
Employers generally provide health insurance to their employees, although this is not always required. On the other hand, people who are self-employed often have struggled to get appropriate and affordable health insurance. With the Affordable Care Act, however, people who are self-employed have many more options to purchase insurance. They no longer can be denied coverage or charged higher rates based on their gender or a pre-existing condition, nor can their coverage be canceled if they develop a medical condition. In 2020, health insurers will have the option to offer cheaper alternative plans that exclude pregnancies and pre-existing conditions. However, individual states will need to decide whether they will allow health insurers to offer the limited plans, so the impact of this new rule remains uncertain.
One of the most controversial provisions of the Affordable Care Act was the individual health insurance mandate. This required people who did not get health insurance coverage to pay a penalty to the IRS unless they were covered by an exemption in the law. While this provision still technically exists, it no longer has any real effect because Congress reduced the penalty to zero in 2019. Removing the mandate may help young people cut costs because they may not need health insurance, but it may increase costs for people who do need it. States have the power to require their citizens to purchase health insurance, and a few states have enacted mandates.
Health Insurance Exchanges
These online marketplaces facilitate the process of purchasing health insurance by allowing people to shop for insurance and then apply for it through a website. Some states offer state exchanges, while other states use the federal exchange. An individual can choose among bronze, silver, gold, and platinum levels of coverage. These cover 60 percent, 70 percent, 80 percent, and 90 percent of the individual’s covered benefits, respectively. Premiums are lowest for bronze plans and highest for platinum plans. Insurers must provide limits for the out-of-pocket costs that policy holders are required to cover.
Self-employed individuals may generally enroll in a plan by using healthcare.gov, and business owners with one or more employees may use the SHOP Marketplace. Some states run their own marketplace platforms.
At a minimum, a health insurance plan offered on an exchange must include emergency services, ambulatory services, hospital stays, lab services, prescription drugs, maternity care, and pediatric services. It also must cover services for managing chronic diseases, rehabilitative services and devices, and services designed to treat mental health conditions and substance abuse disorders. As mentioned above, health insurers will have the option in 2020 to offer cheaper alternative plans that cover fewer services, assuming that states allow these plans.
Plans on health insurance exchanges are available during the open enrollment period, which usually lasts from November 1 to December 15 for coverage during the next year. Some states provide longer open enrollment periods. Exceptions to the open enrollment period may apply if an individual experiences a life-changing event, such as marriage, childbirth, job loss, or a significant move. If you are eligible for Medicaid, you can enroll in a plan under the Affordable Care Act at any time.
The Affordable Care Act provides a tax credit for people with lower incomes who get coverage through a health insurance exchange. The amount of the credit has increased together with increases in premiums. To be eligible for this tax credit, you must have an income that is between the federal poverty level and an amount four times greater than that level. Payments for premiums by families in this income bracket who get coverage through an exchange are capped at between 3 percent and 9.5 percent of their income, depending on how much their income exceeds the poverty level.
Certain self-employed individuals may deduct all of the health insurance premiums that they pay for themselves, as well as their spouses, their dependents, and any non-dependent children who are 26 or younger. Self-employed individuals qualify for this personal tax deduction if:
1They are not eligible for an employer-subsidized health plan (including one through their spouse)
2The deduction does not exceed the income earned from the business