There are five months left in the year and it is time to start planning for a successful 2014. One important element of the business strategy plan for self-employed professionals must be our health insurance. In 2014, our options and requirements will change and we must be apprised of those changes and prepare to either make the most of them or minimize impact, depending on our circumstances.
The individual mandate of the 2010 Affordable Care Act will require Freelance consultants and other self-employed individuals to purchase health insurance as of January 1, 2014, or pay a penalty of $95.00 or 1% of income, whichever is greater. That penalty will increase to $695.00 or 2.5% of income, whichever is greater, in 2016. If the revenue your consultancy generates is between 138% and 400% of the poverty level, you may be eligible for a subsidy that will ( in theory) make the health insurance premium more affordable for you.
The subsidy for health insurance premiums will be available on the Health Insurance Exchange (HIX). Eligibility for a HIX premium subsidy is expected to be on a sliding scale, but exact income thresholds have not yet been revealed. It is possible that a single individual who generates about $45,000 annually will be eligible to receive a HIX premium subsidy, according to information published by the National Association for the Self-Employed http://www.nase.org . It is expected that the income upper limit for a four person household to qualify for the HIX subsidy will be about $94,000.00 in annual revenue.
HIX enrollment is scheduled to begin on October 1, 2013, for coverage that will commence on January 1, 2014. Federal, state and private health insurance plan options will be available for purchase through an online marketplace , where one can compare product features and prices. One’s income tax data will be part of the enrollment application, so that any subsidies applicable to enrollees will automatically be deducted as a tax credit. Eligibility for Medicaid, Medicare, veteran’s benefits or HIX subsidy will be automatically calculated. Be mindful that income of the self-employed tends to fluctuate and eligibility will fluctuate along with annual revenue. It will be possible to renew with your present insurer, but why not shop around and find out what else is available at your price point?
Unfortunately, health insurance costs are expected to rise 10% – 13% in 2014, in response to additional coverage that all plans must provide, in accordance with Affordable Care Act regulations. You may recall that in my April 2, 2013 post , I noted that when the Freelancers Union surveyed its members, it was revealed that 58% earn less than $50,000.00 / year and 29% earn less than $25,000.00 /year. The majority of the groups’ members are in the New York City area, a location that pays higher wages than many areas of the country.
That means many Freelancers will not qualify for the subsidy, but will be required by law to pay large monthly health insurance premiums that will strain the already scarce cash flow. As a result, some will be forced to forgo health insurance, because it is much less expense to pay the penalty, even when it increases in 2016.
The penalty for avoiding health insurance in 2016 will be $1250.00 for those who earn $50,000.00 / year and annual health insurance premiums even for a healthy single person will far exceed that amount. It’s a risky gamble that no one wants to take, but for many it will be the only alternative. When funds are both limited and unpredictable, uncomfortable decisions must be made.
The rising cost of living and diminishing opportunities to generate adequate cash flow make it imperative that Freelance consultants must be savvy and diligent about marketing, networking, obtaining referrals and creating a good business model. Responsible financial management is also necessary, but first one needs to have money available to manage. Slacking off will not be an option, at least not for those who are single or the primary breadwinner of their household.
Thanks for reading,