Obamacare for Self-Employed Michigan Residents
Many self-employed people will be quick to tell you that getting and paying for health insurance is one of the biggest hassles they face. But this may change for the better under Obamacare, which provides new coverage options for the self-employed.
Are You Self-Employed or an Employer?
Before you start evaluating your options for health coverage, you need understand whether you are in fact considered self-employed under Obamacare.
The law says you are self-employed if you are an independent contractor or a sole proprietor without employees. (If you hire other independent contractors to do some work for you, you probably still qualify as self-employed.) Self-employed people can use the new health care marketplace to purchase individual health insurance plans.
If you have employees – usually, workers whose income you report on a W-2 at the end of the year -- you’re considered an employer. In that case, you can learn about purchasing health insurance for yourself and your employees through the SHOP Marketplace.
If you aren’t sure whether the people who work for you are independent contractors or employees, read "Independent Contractor (Self-Employed) or Employee?" on the IRS website.
What Obamacare Means for Self-Employed People in Michigan
Here are six things self-employed people should know about the Obamacare health insurance reforms:
- Through 2018, you must have health insurance, unless you are legally exempt. If you don't, you may have to pay a tax penalty. There are limited exceptions to this rule. After 2018, the legal mandate to have health insurance disappears.
- You can't be denied coverage or charged more because of pre-existing health conditions. If you've been turned down or priced out in the past, you should have new options for coverage under Obamacare.
- If you don't like your current plan, you can shop for new coverage at HealthCare.gov, the health insurance marketplace for Michigan. All plans offered by the marketplace offer a package of essential benefits, including hospitalization, prescription drug coverage, preventative care, and more.
- If you do like your current plan, you may or may not get to keep it. If your insurance company cancels your current plan, you will probably be automatically enrolled in a plan deemed "similar." But this may or may not be what you want. If you receive notice that your plan is ending, it's best to comparison shop to increase the chances of finding a plan with options you like.
- You may qualify for cost-saving tax credits to lower your monthly premiums. To qualify for subsidies in 2018, you need to make less than $48,240 per year as a single person. To learn more about cost-saving options, see below.
- If you do qualify for subsidies, and your self-employment income fluctuates, your taxes could get more complicated. See just below for a discussion of this issue.
You can go to HealthCare.gov to compare the features and costs of a variety of plans, and to determine whether you qualify for subsidies. When you’re ready, you can use the exchange to sign up for the plan you want.
How Obamacare May Affect You at Tax Time
As a self-employed person, chances are good that your income rises and falls from year to year. If that happens, your eligibility for cost-saving subsidies will change, too.
When you apply for coverage at HealthCare.gov, you’ll estimate your annual income, then your eligibility for subsidies will be calculated automatically. As your income rises, your eligibility declines. If you underestimate your income during the application process, you may end up owing money to the IRS when you file your taxes. Overestimate, and you may get money back. Don't make your estimation casually. If you do, you could end up with an unpleasant surprise when your file your next tax return.
For more information about the penalty you’ll face if you don’t have health coverage, see Do I Have to Get Obamacare in Michigan?
To learn more about how much you may have to pay for health insurance, see How Much Does Obamacare Cost in Michigan?
To find out about cost-saving subsidies, see Ways to Save Money on Obamacare in Michigan.
If you’re ready to apply, see How Do I Sign Up for Obamacare in Michigan?
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