Q. Does Obamacare make health insurance for the self-employed less expensive?
A. It depends on how much they earn, and whether they were able to get coverage in the individual market prior to 2014.
Subsidies, Medicaid, guaranteed-issue coverage
Self-employed people who purchase individual health insurance through the Obamacare exchanges are eligible for premium subsidies as long as their incomes are between 100 percent (138 percent in states expanding Medicaid) and 400 percent of poverty level (FPL). And cost-sharing subsidies are available for applicants with incomes between 100 percent (138 percent in states expanding Medicaid) and 250 percent of FPL.
The subsidies cap premiums at no more than 9.69 percent of income in 2017, and as little as 2.04 percent for people on the lower end of the income range (both of these limits represent a slight increase from 2016). In addition, the cost-sharing subsidies reduce the out-of-pocket expenses that an insured pays. People who qualify for subsidies can often obtain health insurance that is far better than the coverage they had in the past, for a fraction of the cost.
But subsidies are not available if the applicant has access to an employer-sponsored plan (including a spouse’s plan) that is considered affordable, which means that the employee pays no more than 9.69% of income for employee-only coverage in 2017.
In the the District of Columbia and the 31 states that have accepted federal funding to expand Medicaid under the Affordable Care Act, self-employed people with household incomes up to 138 percent of FPL are eligible for Medicaid. The free (or very small) premiums are a significant help to entrepreneurs in the early stages of starting their businesses, when income can be quite low.
Regardless of income and ability to pay for coverage, some applicants simply weren’t able to obtain coverage in the individual market prior to 2014, which sometimes prevented people from leaving a job in order to become self-employed. In most states, individual health insurance was medically underwritten prior to 2014, which meant that applications could be declined based on medical history. People in those situations were often eligible for state high-risk pool coverage, but that was typically significantly more expensive than the private market.
Some are paying more
Self-employed people who do not qualify for subsidies and who qualified for medically underwritten health insurance in the individual market prior to 2014 may find that their new ACA-compliant plan is more expensive. Particularly for people with income just a little over the 400 percent of poverty threshold, there can be a subsidy cliff in some areas, making coverage unrealistically expensive.
On the other hand, the new plans are likely providing better coverage than most people had prior to 2014. That may or may not be beneficial to individual policy-holders, however; a couple in their late 50s probably won’t directly benefit from the ACA provision that requires maternity coverage on all plans, but their adult children might.
Is this all going to change under the Trump Administration?
The election of Donald Trump has cast a cloud of uncertainty over the ACA and the future of healthcare reform. You can read more in our Repeal & Replace section, but the general consensus is that Congressional Republicans are planning to repeal the ACA in early 2017, but with a significant delay in implementing that repeal — possibly as much as four years.
What they’ll replace it with is not yet clear. And it’s unlikely that they’ll introduce the replacement bill until after they’ve passed the repeal bill, creating significant uncertainty and possible destabilization in the individual insurance market.
It’s likely that there will be less income-based assistance with premiums under a Republican replacement for the ACA, and it’s also likely that protections for people with pre-existing conditions could be less iron-clad than they are now.
If you’re self-employed or considering that path in the future, you’ll want to pay close attention to the discussions on Capital Hill in the coming months. Reach out to your elected representatives to let them know how their plans to repeal and replace the ACA will impact you and your family, and your ability to be self-employed.
If your current income is just a little above the subsidy-eligibility threshold and you’ve found coverage too expensive in recent years, ask them to address that in their replacement. If you’ve benefited from Medicaid expansion, make sure they know that, and ask them how they’ll ensure that you’re able to keep the coverage upon which you and your family rely. If you’ve got pre-existing conditions, ask them how they’re going to guarantee that you’ll retain access to the full range of health plans available on the market, without medical underwriting. These are the sort of issues that will directly impact self-employed people who buy their own health insurance, and it’s essential that Congress receives input from the people whose lives will be most impacted by the upcoming legislation.