Under the Affordable Care Act (ACA), much of the focus has been placed on businesses and how they must comply with the various mandates within the law. Businesses are separated into two categories:
- Applicable Large Employers – those employers that average 50 or more full-time equivalent employees per year.
- Small Businesses – those employers that average fewer than 50 full-time equivalent employees per year.
But, what if you’re self-employed? Individuals who work for themselves are not exempt from ACA mandates. Self-employed individuals face the following choices:
- If married, investigate obtaining coverage through your spouse’s employer. The self-employed spouse may find that he or she can be added to their spouse’s group coverage at a premium rate that will be less than contracting for individual coverage.
- Purchase health coverage from a private insurer or through the “Marketplace” (the governmental agency clearinghouse). All coverage obtained through the Marketplace meets the Minimum Essential Coverage (MEC) requirement. It will be necessary to inquire if the MEC is met when purchasing coverage from outside of the Marketplace. While investigating coverage through the Marketplace, self-employed individuals may find that they are eligible for coverage provided under a government-sponsored plan (e.g., Medicare, Medicaid, and programs for veterans). The Marketplace can be accessed at www.healthcare.gov.
- Decline to purchase coverage (in effect, self-insure for any healthcare expenditure). This course of action will result in a “Shared Responsibility Payment” (SRP) that will be assessed against individuals who fail to maintain MEC (or have a coverage exemption). SRPs are calculated with Form 8965 and its related worksheets. For 2015, the SRP is either the greater of $325 per adult and $162.50 per child up to a maximum of $975 or 2% of annual household income (that is above the tax filing threshold). These rates will climb in 2016, where non-coverage will require payment of the higher of either: 2.5% of annual household income (above the filing threshold) or $695 per adult/$347.50 per child (up to a maximum of $2,085 per year). The SRPs are paid with a person’s annual individual income tax return.
The open enrollment period of 2015 is closed, unless you have a specific life event that makes you eligible. Open enrollment for 2016 coverage will begin on November 1, 2015.
You can’t ignore the Affordable Care Act. Action and decisions are required, with fees likely to follow whichever path you take. As with all things tax-related, it’s best to have all the necessary information in addition to trusted advisors in order to make the best choices.