Self-employed entrepreneurs and unemployed Americans are two of the groups that stand to gain the most from the Affordable Care Act when the final provisions take effect in 2014.
That's because many of the provisions of the Affordable Care Act, also called Obamacare, are aimed at individual health plans, rather than the group health plans that employers offer.
Here are six ways self-employed and unemployed Americans may be affected by the law.
How will Obamacare affect self-employed and unemployed people?
1. Preexisting conditions
For people with a preexisting condition, such as diabetes or asthma, it has been difficult or impossible to get coverage, unless they work for an employer with a group health plan. Currently, individual health plans can deny coverage, charge much higher prices or even refuse to sell a plan to someone with a preexisting condition.
Obamacare is changing that by requiring insurers to cover preexisting conditions for all Americans, starting Jan. 1, 2014.
This will help entrepreneurs, who buy individual health plans for themselves and their families because they don't have access to the group health plans that midsize and large employers offer. (Midsize employers typically have between 200 and 999 workers). It also will help many Americans who work for small employers that don't offer health benefits, as well as those who work part-time and therefore don't qualify for their employer's health benefits.
2. Health insurance marketplaces
Health insurance marketplaces, also known as exchanges, will be available in each state and the District of Columbia. Enrollment for the exchanges started Oct. 1, 2013, for coverage to take effect Jan. 1, 2014.
Each exchange will provide a website where consumers can compare prices and buy insurance. The features and benefits of each plan will be displayed uniformly so consumers can compare coverage levels. Before this, consumers had to gather cost and benefit information from each insurer separately.
When you fill out an insurance application on an exchange, the exchange will tell you whether you qualify for a tax credit, Medicaid or other financial assistance.
3. Tax credits
You can get a federal tax credit to lower your monthly premiums when you buy coverage through an exchange, if your annual income is between 133 percent and 400 percent of the federal poverty level. That means between $15,281 and $45,960 for a single person, or between $31,321 and $94,200 for a family of four, in most states.
If you are self-employed and have no employees, you can buy insurance as an individual on one of the health insurance exchanges.
As a business owner, you must provide adequate health insurance for your employees if you have more than 50 full-time employees. However, many entrepreneurs are exempt from this requirement because their business has fewer than 50 workers.
You may qualify for the federal government's employer health care tax credit if you offer health benefits and have fewer than 25 full-time employees earning an average of $50,000 per year or less. Starting in 2014, the tax credit is worth up to 50 percent of your contribution toward your employees' premiums, depending on your business size.
To qualify for the tax credit, you must buy the small group insurance through the Small Business Health Options Program, also known as the SHOP marketplace. It's similar to the state-run exchanges that consumers will use to buy individual plans.
4. Individual mandate
The law will require all Americans, even those who are unemployed, to have medical coverage or pay a penalty on their taxes, starting Jan. 1, 2014. This is called the individual mandate.
The penalty for not having insurance will be $95 per adult or 1 percent of annual income, whichever is higher, in 2014, gradually increasing to $695 per adult in 2016 or 2.5 percent of household income, whichever is higher. Parents must ensure that their children are covered.
(Household income is total taxable income, minus any exemptions or deductions. Taxable income includes wages, rental income, royalties, profits from real estate or stock sales, etc.)
There are a few exceptions. You don't have to pay the fee if your annual income is below the poverty line, which is $11,490 for a single person or $23,550 for a family of four in most states. Similarly, you are exempt from the individual mandate if your income is so low that you don't file a tax return.
In addition, you won't need to pay the penalty if you are uninsured for less than three months out of the year.
5. Medicaid expansion
If you're unemployed, you should find out whether you're eligible for Medicaid, based on income level and other requirements regarding residency, immigration status and documentation of U.S. citizenship. The Affordable Care Act expanded Medicaid eligibility to Americans whose income is 133 percent of the federal poverty level or less. That would be $15,281 for a single person this year.
However, the U.S. Supreme Court ruled that states can opt out of this Medicaid expansion. As of Sept. 16 2013, 25 states and the District of Columbia planned to expand Medicaid eligibility, while 22 opted out and three are still debating the decision, according to the Kaiser Family Foundation, a nonprofit organization that studies health care issues. Florida, Texas and Virginia are among those opting out of the Medicaid expansion.
"Expanding Medicaid will help millions of 45- to 64-year-olds who have lost their jobs or are struggling without health benefits, but don't currently qualify for Medicaid health coverage," Nancy LeaMond, executive vice president for social impact at AARP, the advocacy group for older Americans, said in a press release.
6. Preventive care
The law requires all health plans to cover preventive care, such as vaccinations and cancer screenings, with no additional cost to the patient. That means no copays, coinsurance or deductibles. This provision took effect Jan. 1, 2013.
For patients who are unemployed or self-employed, it means they won't need to delay preventive care, like a necessary mammogram or colonoscopy, because of cost concerns.
"The Affordable Care Act is providing better care and better choices for millions of Americans," U.S. Health and Human Services Secretary Kathleen Sebelius said in a press release.