When she was 32, Wendy Drabick opened her own IT and accounting consulting business and started paying health insurance premiums for herself and her family, now a hefty $1,100 every month. That’s about $10,000 more each year than she’d be paying if she worked for a large employer who paid most of the premium. Drabick isn’t complaining, but she would like to know if her premium will go up under the Affordable Care Act (ACA, also known as Obamacare), and if so, how much. Nearly all Americans will need to have coverage, many through state marketplaces, beginning January 1, 2014.
As the sign-up period looms—everyone can start enrolling for insurance on October 1, 2013—millions are anxious to know what the plans will cost, but people who are self-employed or run a small business have a particular concern, says Katie Vlietstra, director of government affairs at the National Association for the Self-Employed (NASE), in Washington, D.C. “Self-employed people typically purchase more catastrophic and high-deductible plans”—meaning plans that offer the bare minimum of coverage, and only for extreme medical situations—because those are more affordable, says Vlietstra. This group may be trying to figure out how to budget their insurance costs for the remaining months of 2013, until coverage under Obamacare kicks in.
Five states have announced their new health-insurance premium rates and in all but one the rates are higher than what people pay now.
Unfortunately, there’s not enough information yet to let them do that. Only five states, including Oregon and Maryland, have announced their premium rates, and all of those, excepting Oregon, will be posting higher premiums than their residents generally pay now. Vlietstra says the increases tend to be about 2 to 5 percent, except for Maryland, where it could be as high as 25 percent, depending on the plan chosen. Insurers say the rate increases are due to the new “essential benefits” most health insurance policies will have to include as part of the ACA, such as maternity and mental health coverage. While the rates can be hard to swallow, the new benefits will be important to many. Substance abuse treatment, for example, will be a required benefit; about one-third of current health plans don’t cover that now.
Vlietstra says that if you’re self-employed you ought to become an educated consumer by reading up on the coming changes at healthcare.gov, the government’s website devoted to the ACA. “Hopefully, we’ll have more information on cost within the next 30 days,” says Vlietstra. “With self-employed people planning now for 2014, I recommend they plan for a 15 percent increase and peel back if that doesn’t become a reality.”
Plan for a 15 percent increase in your health-insurance premium, says one self-employment expert.
She thinks the self-employed ought to plan a little aggressively in this area—even overplan—so that when they discover how much they’ll need to pay for coverage, they have budgeted for it. NASE is currently developing questions for the Department of Health and Human Services (which oversees the implementation of Obamacare) and will put the agency’s responses on their website within the next month or so, they hope. Among other questions, the NASE hopes to soon find out definitively how much coverage will cost for those who are self-employed and how secure the data will be for determining eligibility for tax credits and assistance with premiums (the IRS and HHS will share data on that).
There’s also a chance—although slim—for some tax relief on health insurance costs down the road for the self-employed. For the 2012 tax year, people who worked for themselves were allowed to deduct health insurance as a business expense, but that was only applicable last year and is not currently part of the ACA’s rules. With 22 million self-employed people, Vlietstra says it’s an issue the NASE has raised again and there is a bill pending in the House of Representatives to reinstate this deduction.
Are you self-employed? What's your game plan for when Obamacare kicks in in January 2014?