Navigating the ACA: Health Insurance Options for Self-Employed Professionals
March 10, 2015
Leaving your job to pursue a freelance career is an exciting prospect, but there’s one hang-up that confounds many would-be solo workers. It isn’t the thought of leaving the steady salary of a traditional job, and it isn’t the reality of losing health insurance and benefits like sick days – although both of these are valid concerns.
Instead, one of the biggest issues potential freelancers face is the loss of benefits – specifically, health insurance coverage. The Affordable Care Act (ACA), colloquially known as “Obamacare,” offers some solutions to help cover this gap, but it isn’t a perfect solution. There are a number of things you’ll want to know about this program before you rely on it to cover your insurance needs.
Qualifying for Coverage
If you’re young and healthy, the issue of transitioning from your employer’s health insurance plan to your own private policy purchased through the ACA might not be a concern for you (though you’ll certainly want to be sure you don’t incur any penalties for going without coverage).
If you’re older, have medical conditions that require regular care from doctors and specialists, or have a spouse or dependents who rely on your coverage, preventing gaps between your insurance policies may be much more important. In either case, you’ll want to be aware of the two different ways you can enroll in an ACA health plan:
– Open enrollment. Every year, from November 15th through February 15th, any individual that wants to purchase a Qualified Health Plan through the state and federal ACA exchanges can do so. If you plan to leave your job for self-employment during this period, you will be able to enroll without worrying about proving a qualifying event.
- Qualifying event. If you want to purchase an ACA plan outside of the open enrollment window, you’ll need to meet the criteria for a qualifying event to take advantage of a special enrollment period. A qualifying event occurs when a lifestyle or employment change – such as getting married, getting divorced, leaving your job, or moving between states – affects your existing insurance coverage. If your qualifying event is covered, you typically have 60 days to enroll in a new ACA plan.
That 60-day window is an important one for freelancers to note. If you leave your job and miss the enrollment window – or if you’ve been out of the workforce for sometime without coverage before launching your freelance business – you may need to wait for the next open enrollment period to sign up.
Choosing Your Coverage
If you are eligible to purchase a Qualified Health Plan, your next step will be to research the options that are available to you. Depending on where you live, your state’s health insurance exchange marketplace will be managed by either your state or the federal government. Visiting Healthcare.gov will help you determine which scenario applies in your case, as well as direct you to the listing of plans available in your state.
Regardless of the state you live in, all health insurers who participate in the ACA exchanges are required to tailor their plans to meet one of five levels:
- Catastrophic coverage. Catastrophic plans cover less than 60% of the total average cost of medical care, and are only available to those under age 30 and with a hardship exemption.
- Bronze. With a Bronze plan, you’ll pay roughly 40% of your medical costs, and your plan will pay the remaining 60%.
- Silver. With a Silver plan, you’ll pay roughly 30% of your medical costs, and your plan will pay the remaining 70%.
- Gold. With a Gold plan, you’ll pay roughly 20% of your medical costs, and your plan will pay the remaining 80%.
- Platinum. With a Platinum plan, you’ll pay roughly 10% of your medical costs, and your plan will pay the remaining 90%.
Keep in mind that, apart from these averages, all ACA plans are required to cover emergency services, hospitalization, pregnancy care, pediatric services, prescription drugs, mental health services, laboratory services, and rehabilitative services, among others. The amount that you’ll pay for these treatments will vary based on your plan, but you are guaranteed to receive at least some level of coverage for these services.
As you’re evaluating plans, there are three major numbers you’ll want to consider:
- Your monthly premium. This is the amount you’ll pay each month for your coverage, which will depend on the tier of coverage you select and whether or not you’re eligible for program subsidies.
- Your deductible. Your deductible is the amount you’ll pay out of pocket before your plan’s coverage begins. Some plans may include a copay for standard office visits that applies before your deductible; if this type of coverage is important to you, you’ll need to read each policy’s benefits summary closely to see how visits are billed.
- Your maximum out-of-pocket (MOOP). This number is the largest possible amount you’ll pay before your plan starts covering essential services at 100%. In 2015, individual plans have a maximum MOOP of $6,600, while family plans have a limit of $13,200.
Evaluate the different plan options available to you based on your average health care usage. If, for example, you rarely visit the doctor, paying the high premium costs of a Platinum plan could cost you more than paying some expenses out-of-pocket. Conversely, if you have a chronic condition that requires ongoing care, choosing a plan with a low deductible and low MOOP can make the higher premium costs worth it.
Applying for Coverage
After you’ve selected your ACA insurance plan, applying for coverage is a relatively straightforward process. Either your state exchange or the Healthcare.gov website can walk you through the application process, though you can also apply over the phone or in person at select locations.
The most important thing you’ll need to be aware of here as a self-employed professional is estimating your freelance income, as your projected income will determine whether or not you’re eligible for subsidy assistance to pay your premiums. Assistance, in this case, actually comes through three different mechanisms: Premium Tax Credits to lower your premiums, Cost Sharing Reduction subsidies for lower out-of-pocket costs, and Medicaid and CHIP.
As a general rule, you can expect to receive some type of assistance if your income is below 400% of the poverty line. If your earnings are less than 250% of the poverty line, you’ll qualify for further subsidies, while those making less than 138% of this threshold will likely be eligible for Medicaid (in states that elected to expand Medicaid coverage).
However, if you claim assistance as a self-employed worker, you will need to provide documentation supporting your estimated income, which may be informed by your past experience, industry averages and other factors. Consider your estimation carefully, as claiming assistance you aren’t actually eligible means you’ll wind up paying back these credits and subsidies on your taxes. You’ll also need to update your exchange provider if your income estimate proves off throughout the year so that your assistance level can be adjusted.
Once you’ve completed your application, it will be reviewed by the insurer you’ve applied to receive coverage through. If everything looks good, all that’s left is for you to pay your first premium and enjoy the peace of mind that comes from knowing you’re covered in the event of a medical emergency!