Key Provisions Under the Affordable Care Act for Self-Employed Individuals
Implementation of the Affordable Care Act occurs in stages, with many of the reforms and requirements taking effect in 2013 and 2014. Some of the provisions that may impact self-employed individuals include:
- Individual Shared Responsibility Provisions
Starting in 2014, the Individual Shared Responsibility provisions of the Affordable Care Act call for each individual to have basic health insurance coverage (known as minimum essential coverage), qualify for an exemption, or make a shared responsibility payment when filing a federal income tax return. Individuals will not have to make a payment if coverage is unaffordable, if they spend less than three consecutive months without coverage, or if they qualify for an exemption for several other reasons, including hardship and religious beliefs. Minimum essential coverage includes, at a minimum, all of the following categories: Employer-sponsored coverage (including COBRA and retiree coverage), coverage purchased in the individual market, Medicare Part A coverage, Medicaid coverage, Children's Health Insurance Program (CHIP) coverage, certain types of Veterans health coverage, and TRICARE. It does not include certain specialized coverage such as only for vision or dental care, workers’ compensation, or coverage only for a specific disease or condition. For more information on the Individual Shared Responsibility requirements and exemptions that may apply, refer to this Fact Sheet from the U.S. Department of Treasury as well as these Q&As from IRS.
- Individual Insurance Marketplaces
Coverage through new competitive health insurance marketplaces for individuals and small businesses will be in place January 1, 2014 with open enrollment beginning October 1, 2013. The individual health insurance marketplaces will offer a choice of four levels of benefit packages that differ by the percentage of costs the health plan covers. Individuals and the self-employed may qualify for individual tax credits and subsidies on a sliding scale, based on income. Increased access to quality, affordable health care will make it easier for potential entrepreneurs to go out on their own instead of staying at larger firms simply because of "job lock".
- Coverage through Medicaid Expansion
Each state operates a Medicaid program that provides health coverage for lower-income people, families and children, the elderly, and people with disabilities. The eligibility rules for Medicaid are different for each state, but most states currently offer coverage for adults with children at some income level. In addition, under the Affordable Care Act, states have the option to expand Medicaid eligibility to include adults ages 19 – 64 with incomes up to 133% of the Federal Poverty Level (about $15,000 per year for an individual, $31,000/year for a family of four). To learn more about your state Medicaid program and other options available to you, use the insurance and coverage finder or visit Medicaid.gov.
- New Medicare Assessment on Net Investment Income
Beginning January 1, 2013, a 3.8% tax will be assessed on net investment income such as taxable capital gains, dividends, rents, royalties, and interest for taxpayers with Modified Adjusted Gross Income (MAGI) over $200,000 for single filers and $250,000 for married joint filers. Common types of income that are not investment income are wages, unemployment compensation, operating income from a non-passive business, Social Security Benefits, alimony, tax-exempt interest, and self-employment income.
Find Insurance Options
Find and compare health plans using this interactive tool provided by the U.S. Department of Health and Human Services.
Timeline of Provisions
The Affordable Care Act timeline provided by the U.S. Department of Health and Human Services includes the next steps you can take to implement the provisions