Question: I am a 56-year-old self-employed woman with no dependents. I do not currently have health insurance but I need it and I understand I will have to buy it starting in 2014. What should I do and how can I afford it?
Answer: Under the individual mandate of the Affordable Care Act, you will have to purchase health insurance starting Jan. 1, 2014 or pay a penalty. The penalty starts at $95 per adult, or 1 percent of income, in 2014 but goes up to $695 per adult, or 2.5 percent of income, by 2016. This chart (PDF) explains the basics.
There are provisions in the law designed to help uninsured individuals buy health coverage on their state or federal government online exchanges if it is not provided through an employer.
If your annual income is at or below 138 percent of the federal poverty level, you should qualify for Medicaid, the government’s health coverage for low-income Americans. For 2013, the poverty guideline is $11,490 for one person and $23,550 for a four-person household.
If your self-employment income is between 138 percent and 400 percent of the poverty level, you may be eligible for a premium subsidy to buy coverage on an exchange. As many as 19 million Americans will be eligible for subsidies, which will average an estimated $4,600 per person in 2014, says Katie Vlietstra, director of government affairs at the National Association for the Self-Employed.
While the subsidies will be doled out on a sliding scale, and exact numbers haven’t yet been specified, one person making up to about $45,000 could be eligible for subsidized coverage. The annual income limit would go up to about $94,000 for a four-person household. Here’s a calculator you can use to determine if you qualify for a subsidy and how much it might be.
The goal of the exchanges, which are due to come online on Oct. 1, is to integrate applicants’ income tax data into their enrollment applications so that any subsidies which apply to them would be automatically deducted from the cost of an insurance purchase, Vlietstra says. “The idea is that you’ll be able to complete one application that will allow you to review what you’re eligible for as it relates to things like Medicaid, Medicare, veterans’ benefits, or individual subsidies. They are trying to make the information consistent throughout the states and the federal exchanges,” she says.
She and others worry, however, that the exchanges will not be adequately understood by the public, will not be ready by October, or will be so difficult to navigate that many eligible individuals will choose to pay the penalty rather than purchase coverage, which has been estimated to cost up to $12,000 annually for a family of four.
“What keeps me up at night is the idea that Oct. 1 rolls around and enrollment becomes a huge mess. Then the 22 million self-employed Americans will be hit with the hard figures and have little time to plan for next fiscal year,” she says, noting that several estimates have shown that insurance premiums will rise by 10 percent to 13 percent in 2014 because the Affordable Care Act requires policies to cover certain essential services.
If unfamiliarity or complexity keeps healthy, younger enrollees away from the exchanges and they opt to pay the relatively low first-year fine, that would be a worst-case scenario, says Jay Starkman, chief executive of Engage PEO in Fort Lauderdale, which handles administrative duties like health insurance enrollment for small businesses. “The purpose of this law is to get health insurance for people who don’t have it now. If people say they don’t want to deal with it, or they haven’t gotten enough good information about it, that will leave enrollment to the unhealthier and older people, which will drive rates up even more,” Starkman says.