Obamacare for Self-Employed Montana 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 Montana
Here are six things self-employed people should know about the Obamacare health insurance reforms:
- You must have health insurance, unless you are legally exempt. You were required by law to sign up for a health insurance plan by March 31, 2014. If you didn't, you may have to pay a tax penalty. There are limited exceptions to this rule.
- 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 Montana. 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. Health insurance providers have canceled many existing insurance plans that don’t meet Obamacare's requirements. People with individual coverage -- for example, self-employed people who buy their own insurance -- have been disproportionately likely to lose their current plans. If this has happened to you, what’s next is not entirely clear. You may have to go to your state’s exchange to buy a new plan -- or you may get to temporarily keep your old plan because of a fix proposed by President Obama. Get in touch with your current insurer to see whether keeping your existing plan may be an option. (Update: On December 19, 2013, the Obama administration announced that people whose insurance plans were canceled qualify for a hardship exemption from the law, for the year 2014 only. That means if your plan was canceled and you decide to go without insurance in 2014, you won't have to pay a tax penalty in 2015. As an alternative, you are now allowed to purchase a minimal "catastrophic" insurance plan, if you prefer.)
- You may qualify for cost-saving subsidies to lower your monthly premiums and/or reduce your out-of-pocket costs for health care. To qualify for subsidies in 2014, you need to make less than about $46,000 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 2014 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 Montana?
To learn more about how much you may have to pay for health insurance, see How Much Does Obamacare Cost in Montana?
To find out about cost-saving subsidies, see Ways to Save Money on Obamacare in Montana.
If you’re ready to apply, see How Do I Sign Up for Obamacare in Montana?
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