With the scheduled opening of health insurance marketplaces, often called Obamacare exchanges, just a couple of weeks away on Oct. 1, readers are sending in many questions about how the system will work for small business owners and the self-employed. I’ve answered a selection of new ones below; previous answers are available here.
Question: I read the article about what employers are supposed to do to notify employees about Obamacare on or before Oct 1. However, Oklahoma has chosen not to set up a health exchange. Do I still need to give my nine employees a copy of the form anyway?
Answer: Every business that has two or more employees and annual revenue of more than $500,000—meaning it is governed by the Fair Labor Standards Act—has to send out the notice, regardless of what state they are located in. This section of the Labor Department’s website can help determine whether your business falls under the Fair Labor Standards Act. Scott Beaver, president of employee benefit software company Cobra Solutions, advises business owners to develop an employee spreadsheet to track health insurance data and mandatory health-care notices. Model notices are located on this part of the DOL website.
“Gather and input the data required on the spreadsheet and produce the marketplace notice to send to your employees. Create a report detailing each employee’s notice for your organization’s records and retain a digital copy of each employee’s notice that may be easily obtained if ever needed as proof of compliance,” Beaver wrote in an e-mail.
The Department of Labor recently announced that there will be no fine or penalty for failing to provide the exchange notice.
Question: Is there a form the government will require the employer to fill out that establishes that he has less than 50 full-time employees, whether it be submitted to the powers that be or kept on file for future reference?
Answer: There is no form for this purpose, says Keith McMurdy, an attorney at Fox Rothschild who is advising clients about Obamacare compliance. He recommends, however, that small employers keep a record for audit purposes of how they made the determination that they employ fewer than 50 full-time employees (or the equivalent, counting part-timers).
Your employee records would likely be sufficient if you are well under the 50-person limit, but if you are close to 50 employees, write down how you calculated your employee hours and keep it on file in case your company ever gets audited on the issue, McMurdy suggests.
Question: I’m self-employed, and the tax credit doesn’t help me since I need to reduce my costs up front. We don’t have enough now to get by on a month-to-month basis, much less have to pay for worthless insurance with huge deductibles just to make the insurance companies richer.
Answer: Premium assistance can actually be front-loaded to help cover the costs of your monthly health-care premiums, says Katie Vlietstra, director of government affairs for the National Association for the Self-Employed. “Consumers entering the exchange marketplace will be able to select if they would like their premium assistance calculated in advance of their tax filing year to help offset the monthly premium rates.”
Vlietstra adds a cautionary note, however, for self-employed individuals whose income may go up unexpectedly during the year, thus reducing their eligibility for the government subsidy on their premiums. “You will have to pay back any difference when you file your tax return covering the year,” she says.
Question: Applying for Obamacare in California as a self-employed person, am I to put in my gross income or net income as the income I make? Also, my husband is disabled and has Social Security and disability income. What am I to put down for his income?
Answer: List your household income using your modified adjusted gross income, sometimes abbreviated MAGI. That is your adjusted gross income (you’ll find it at the bottom of the first page of your 1040 tax return) plus any other nontaxable income you receive, including Social Security payments.
Here’s an explanation from the Social Security Administration of how to calculate MAGI. Sharon Stiller, partner and director of the employment law practice at Abrams Fensterman, says the insurance marketplaces will use data from tax filings and Social Security to verify household income information provided on the Obamacare applications. “In many cases, they will also use current wage information that is available electronically,” she wrote in an e-mail.
Question: I am self-employed with a home-based business in Ohio. Am I required to get Obamacare? Do I buy it as a business or as a private citizen?
Answer: First, let’s note that the coverage offered in the state and federal marketplaces is being sold by private insurance companies. “Obamacare” does not refer to government insurance.
Starting in 2014, most Americans are required to have health insurance coverage under the Affordable Care Act’s individual mandate. Unless you are exempt, you will be faced with a penalty for not having insurance. For 2014, the penalty will be $95, or 1 percent of household income; it goes up to $325, or 2 percent of household income, in 2015 and $695, or 2.5 percent of household income, in 2016.
Hardship exemptions are available for those whose income is below the minimum threshold for filing a tax return and those who can’t afford coverage because the minimum they must pay for premiums is more than 8 percent of their household income.
Self-employed people can buy insurance in the online marketplaces as individuals, and those under certain income levels could qualify for subsidized coverage. One person making up to about $45,000 could be eligible. Ohio does not plan to set up its own state marketplace, so if you want to investigate coverage, you should use the federal exchange.