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Affordable Care Act: Some Quick Facts about Healthcare Reform

Introduction

The new healthcare law, known as the Affordable Care Act, is bound to have an impact on freelancers.  Then again, it could also affect those working under an employer or those qualifying for healthcare benefits on their employed spouse’s health insurance plan, because under the new healthcare law employers can opt to send their employees to one of the federal exchanges now providing health insurance.  In view of the foregoing, below is a brief summary of how it works, with a bit of supplementary information compiled from Arizona Daily Star articles and the healthcare.gov website.

While the Affordable Care Act has produced mixed responses from the public as a whole and freelancers in particular, I must admit that I tend to lean in favor of pursuing a healthcare plan through one of the federal exchanges.  As one who has been self-employed since 2003, I’ve had to pay my health insurance costs out of pocket. I have found this an expensive proposition, despite the fact that I haven’t experienced any major health problems since going freelance. Then, too, I can rightly count myself among the many erstwhile insurance-carrying Americans who have received notices from their insurance companies stating that their current plans will ultimately be dropped.  If I did nothing, my insurance provider would automatically switch me to a different plan meeting the new healthcare law criteria.  If and when this happens, my insurance costs, already not cheap, could go up.  If, on the other hand, I get insurance through a federal exchange, I could qualify for a tax credit and thereby save money.  To me, the latter option makes perfect sense.  As a self-employed person, not poverty-stricken but not wealthy either, I’m all for finding ways to cut down on expenses.

Some Quick Facts

People wishing to sign up for health insurance through one of the federal exchanges can do so up to March 31, at which time the open enrollment period ends. Those signing up any time between Feb. 16 and Mar. 15 will get coverage starting April 1, whereas for those signing up Mar. 16-31 coverage starts May 1. Anyone not carrying insurance by the end of March 31 will be subject to fines.  An exception can be granted for those qualifying for a hardship exemption (granted in cases of bankruptcy, foreclosure, homelessness, domestic violence, etc.).

Note:  Those who miss the open enrollment period ending on Mar. 31 will have to wait until fall 2014 to sign up.   Those who have a qualifying event can enroll in a special enrollment period.  Otherwise, those not already signed up will have to do so any time from October  15 through December 7, 2014 to qualify for 2015 coverage.

How does one sign up?  By going to the government’s healthcare website at http://www.healthcare.gov and following the instructions for setting up a new account.  When this site was launched back in October, a number of people attempting to do so got error messages.  However, major debugging efforts on the part of technical support teams have considerably improved the performance of the site.  When I finally got around to setting up my own account in late January, I was able to do so without any trouble.

The next step is filling out the application, which can be done online.  The most complicated, detailed questions are those concerning income and expenses.  As a business owner, I had to determine my gross income, deduct expenses, and then subtract that from my gross in order to come up with my adjusted income – the figure used by the feds to determine who qualifies for a tax credit.

Coming up with my gross income, carefully calculated with the aid of spreadsheet software, was the easy part.  When it came to figuring what I could count as an expense, however, I found I had questions.  For help I turned to the online chat line, for which links appear throughout the healthcare.gov site.  Because the chat line is up 24-7, I was able to get help right away.  A quick example of a question to which one can get an answer: Q: Can one count money contributed to a traditional IRA as an expense? A: Yes.

The end result of all this? I found I was one of the 75% of Arizonans who qualified for a tax credit under the healthcare law.  Depending on which insurance plan I end up choosing, I stand to pay considerably less each month than what I’ve been paying for insurance up to now, without any sacrifice of coverage.  Now all I have to do is pick a plan in which to enroll. Research is still ongoing for this, but I’ve made progress in narrowing down my choices and hope to make my final selection soon.

Meanwhile: Concerns Raised and Questions Answered

It is true that skeptics have raised questions concerning how good the healthcare reform and the federal exchanges really are. Below is a brief summary of questions and answers:

Q:  Won’t the new insurance offered through the federal exchanges be awfully expense? What if I can’t afford it?

A:  People not eligible for state-sponsored health insurance available to those on a low income (for example ACCSS, an Arizona-run program) can in many cases qualify for a federal tax credit.  This can help considerably toward reducing expenses involved in paying monthly health insurance premiums. One can either receive the tax credit as a lump sum to be paid annually as part of one’s tax refund or apply part or all of the tax credit toward reducing one’s monthly premium.

Q:  How do I avoid getting stuck with expensive insurance covering things I don’t really need?

A:  Admittedly, insurance plans available through federal exchanges can vary widely by county. In Pima County, Arizona, at least, a number of options are available, falling into categories ranging from low-premium plans providing minimum coverage to more expensive plans that cover more. (More details on that later.)

Q:  As a freelancer, I can’t possibly predict in advance what my income will be in a given year or even month. What if my income turns out to be way off from what I have entered on my application? Won’t I then have to report my adjusted income figure every month?

A:  For health insurance tax credit purposes, income figures are adjusted not monthly but annually when one does one’s taxes. Thus, if one’s income for a given year has turned out to be significantly higher than one had expected, one will owe taxes accordingly. If, on the other hand, one’s income proves lower than expected, one may be due a tax refund.

Q:  I feel uneasy about the prospect of having my personal information available online. If I have to report all kinds of detailed information before enrolling in a federal exchange plan, what’s to prevent hackers from stealing my information?

A:  The security of online personal information, whether health-related or financial, is a very real concern.  Doubtless we’ve all heard reports of major information security breaches like the recent one affecting millions of Target department store chain customers.  However, the financial information one is required to disclose when applying for insurance through a federal exchange is largely the same as what the Internal Revenue Service already collects on everyone for tax purposes.  Moreover, those uneasy about entering their information online can instead opt to submit a paper application.

Four Main Levels of Coverage

In general, the lower one’s monthly insurance premium, the more out of pocket costs one has to pay for healthcare costs including doctor’s appointments, prescription drugs, or unexpected medical events (e.g., car accident injuries, cancer diagnoses, etc).  Those opting for more expensive insurance have to pay higher monthly premiums but get better breaks on coverage and generally have smaller out of pocket expenses.  Below is a brief summary of the main levels of insurance coverage available, from the cheapest to the most expensive, along with some accompanying statistics for those interested:

Bronze:  This plan covers 60% of one’s total average cost of care.  Of those who have signed up for the new health insurance so far, 1 in 5 people have picked this plan.

Silver:  Covering 70% of one’s cost of care.  This is the most popular plan, chosen by 3 of 5 people.

Gold:  Covering 80% of one’s cost of care.  So far 13% have picked this level, which most closely compares to insurance plans typically provided by employers prior to the enactment of health care reform.

Platinum:  Covering 90% of one’s cost of care. 7% of those signing up have picked this level.

A fifth plan not covered above is the catastrophic plan, for which one receives very minimal coverage, mainly for major medical events, but for which one can pay an attractively low monthly premium.  Generally one has to be under 30 to qualify. So far 1% has picked this type of insurance.

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