Q&A: Buying Health Insurance on the Obamacare Exchange for Self-Employed People

This week, in another post in our series to help consumers understand the Affordable Care Act (ACA, or “Obamacare”), experts from NPR address how self-employed people may use the state or federal exchanges to purchase health insurance. Assuming, of course, that the balky websites are improving…

Q: If you are self-employed, can you get insured through the exchange regardless of how much you earn?

A: There’s no upper limit to how much you can earn and still be able to buy health insurance on the exchange. But there is an upper limit on how much you can earn and qualify for a subsidy to help offset the costs. The upper limit is 400% of the federal poverty level – about $46,000 for an individual and about $94,000 for a family of four. If you earn less than those amounts, you can qualify for a subsidy that will lower your premiums. Earn more than that, you’ll pay the full cost of the plan.

Q: Let’s say you reside in one state, for example New Jersey, but work or live close to another, say, New York, where your doctor practices. Can you buy a New York state plan as a New Jersey resident?

A: Not right now. You’re required to sign up on the exchange for the state that matches your mailing address. But insurance plans can and do include doctors and hospitals in other states, particularly in areas located near a state border.

There is a provision in the ACA to allow something called health care choice compacts that would enable you to purchase a plan in a state where you don’t live. So far, seven states – South Carolina, Indiana, Texas, Georgia, Utah, Missouri and Oklahoma – have passed Interstate Health Contacts legislation that could allow health insurance policies to be sold across state lines. But none of those states has taken the necessary steps to make it happen. So right now you have to stay in your home state.

Q: What if you are self-employed, sign up for a plan on the health exchange, get a federal subsidy to help pay premiums, but your income falls below the exchange threshold. You should be on Medicaid instead, so are you expected to repay the subsidies you initially received?

A: No. The law expected that most people with low incomes would be enrolled in the Medicaid program. So if your income is below the poverty line – $11,490 for an individual this year – you’re not eligible to buy coverage on the exchange. You could enroll in Medicaid instead, but only if your state is one of the 26 that are expanding the program. If not, you may fall into the gap where there is no program for you.

The catch is that you have to estimate your income in advance. So you may overestimate your income, buy coverage and get subsidies, and then discover at tax time that you weren’t actually eligible, after all, because you earned too little. This possibility has been taken into account, and you won’t be punished or even asked to pay back the subsidies in those situations.

In contrast, if you underestimate your income and get subsidies, then end up earning more, at tax time the following year you will be expected to pay back subsidies you weren’t eligible for.