For years now sole proprietors have had problems getting and paying for health insurance. Having a preexisting condition made matters worse or even impossible in some cases. As a result many individuals relied on their spouse’s (or partner’s) employer-sponsored family coverage for their health insurance. Those without this option had to settle for limited medical coverage or even go without health insurance.
The Obama administration’s Affordable Care Act (ACA) aims to address this problem by providing much needed help to individuals and sole proprietors. With the full implementation of the law just around the corner, it is important that we take a look at the key features that will affect sole proprietors starting 2014.
1. All sole proprietors are individuals
The healthcare marketplace classifies sole proprietors as individuals. Starting in 2014, the Affordable Care Act will require all individuals to have qualified health insurance coverage or pay a penalty.
Sole proprietors will have access to health insurance exchanges which will help let them compare plans from different providers and choose the one that suits their needs. Plans at the exchanges will be available in four levels of coverage:
- Bronze level – 60 percent coverage
- Silver level – 70 percent coverage
- Gold level – 80 percent coverage
- Platinum level – 90 percent coverage
A special catastrophic plan will also be available to individuals 30 years old and below.
The percentage of coverage at each different level refers to the dollar amount of health care costs covered by that level of insurance. The remaining percentage will be paid for out of pocket through a combination of co-pays, deductibles, and coinsurance.
Except for the catastrophic plan, all plans must cover minimum “essential health benefits” which include:
- ambulatory (“walk in”) patient services
- emergency services
- maternity/newborn care
- mental health and substance use disorder services (including behavioral health treatment)
- prescription drugs
- rehab and habilitative services/devices
- lab services
- preventive/wellness services and chronic disease management
- pediatric services (including oral and vision care)
Enrollment for the exchanges will start on Oct. 1, 2013 for coverage beginning on Jan. 1, 2014.
2. You may qualify for a tax credit.
If your household income is somewhere between 133% and 400% of the federal poverty level (FPL), you may qualify for a premium tax credit.
Offering tax credits ensures that people with low to moderate income do not spend more than a certain percentage of their incomes on health coverage.
How much of a tax credit will an individual receive? Credits will be determined on a sliding scale based on income. The lower your income is, the bigger the credit will be.
For individuals and sole proprietors, the tax credits will act like subsidies to help them purchase health insurance. They will no longer have to wait until they file their taxes to get reimbursed through a tax refund. Even if they don’t owe anything in taxes, they can still receive the subsidies.
3. You can choose to have your plan “grandfathered”
If you were already enrolled in a health insurance plan on March 23, 2010 when the Affordable Care Act was signed into law, then you can choose to keep it.
This is good news if you feel like the new law doesn’t offer you anything better and want to stick with your current plan.
However, you should keep in mind that your grandfathered plan won’t be required to cover the new mandated essential benefits present in the healthcare law. Depending on your policy, your insurance provider could raise your premiums or even drop your coverage if you get sick.
4. You may pay a penalty
Beginning in 2014, the Affordable Care Act requires all individuals to have “minimum essential coverage” or pay a penalty. The coverage may come from certain government-sponsored plans, employer-sponsored plans, plans in the individual market, grandfathered health plans, or any other recognized health benefits coverage.
Next year the penalty for not having insurance will be either $95 or 1% of the individual’s income, whichever is higher. In 2015,that number goes up to $325 or 2% of the person’s income. In 2016, it will be $695 or 2.5% income. After 2016, the penalty will be tied to the rate of inflation.
There are of course some exceptions to the mandate. People with incomes below the federal poverty level and those with health insurance premiums that would cost more 8% of their monthly income do not need to purchase coverage. In most cases, they would be eligible for federal assistance or Medicaid. People who refuse health insurance on religious grounds are also exempted from the individual mandate.
5. You cannot be denied coverage even with a preexisting condition
Gone are the days when you had to worry about qualifying for health insurance coverage because of a preexisting condition. The ACA includes a guaranteed issue clause that prevent insurance companies from turning down sick customers.
Furthermore, individuals will not be charged higher rates based on their health status or gender. Insurers are also not allowed to cancel your coverage if you get sick.
The Affordable Care Act aims to increase health coverage for millions of Americans, streamline the delivery of health care services, and reduce the costs of health care for everyone. Helping out individuals and sole proprietors is certainly in line with these goals.
While the overall success of the new law is still uncertain. Provisions like guaranteed issue, providing tax credits, and removing lifetime and annual caps on spending for health benefits are certainly great news for your sole proprietorship.
About the Guest post author:
Michael Cahill is the editor of theVista Health Solutions blog. Follow him on Twitter at @Vistahealth