Self-Employed + Obamacare+Reduced Income. How does that work?
October 1, 2021 7:10 AM   Subscribe

I am self employed. The last few years my income has been high, and I have bought health insurance directly (not through the ACA exchange). Next year I expect to have lower income. Can I get Obamacare subsidies? How?

I live in Massachusetts. I am self-employed, participate in two LLCs, and own a rental property. I have never purchased health insurance through the ACA exchange because (a) I assumed I wouldn't qualify for subsidies because of my income, and (b) I was never able to figure out how to put my self-employment income numbers into the ACA exchange calculator, and (c) I couldn't find a simple statement along the lines of "if you make $x/year, you will get $y subsidy".

Now, though, there is a good chance that my income will be much lower in 2022. It might make sense to get insurance through the ACA exchange. Which leads to another question:

When I purchase insurance through the ACA exchange, is it possible to get the subsidy based on my expected 2022 income rather than my actual 2021 income? Since I am self-employed, I will not be "losing my job" or "changing jobs". There won't be a change in my employment status. I will just be making less money.

How does that work? That's my main question.

In addition, if anyone has any pointers in estimating Obamacare subsidies in Massachusetts for self-employed people, that would great.
posted by Winnie the Proust to Work & Money (7 answers total) 1 user marked this as a favorite
 
From my experience in NY freelancing during the early Obamacare years, the helpful navigators over the phone explained that a significant change in expected income does count as a qualifying life event. And when filling out freelance income, the expected information was your prior three months' income, not the prior year's (though that may have also been an option.)

(I also vaguely recall that when signing up in December of one year, they told me to fill out that info as an estimate of next year's income instead of using the actual prior three months, but I'm not sure the forms themselves would have made me think that was okay, absent being specifically told to over the phone.)

Additionally, no matter what income you project when signing up, the amount of subsidies you receive gets truly finalized when you file your taxes the following year. If you ended up making less during the year, you'll get more back in subsidies when you file (and vice versa).

And as for estimating the subsidies, the most direct way would be to just fill out your info on on the MA exchange website to see what plans/prices you're offered. (If I recall, the precise subsidy amounts are different depending on what plans are offered in your state that year and which quality tier -- gold, silver, or bronze -- you end up picking.)
posted by nobody at 7:43 AM on October 1, 2021 [1 favorite]


Whether you qualify for premium tax credit -- to reduce the cost of your monthly premiums -- depends on your household size and income. Under the American Rescue Plan, everyone can potentially qualify for some subsidy this year and next year; the limit on how much a plan's premiums can cost is 8.5% of your household income. If you make less than 400% of the federal poverty level, it could be much lower, even as little as $0/month.

You can get "advanced payments of the premium tax credit" applied to your monthly bill -- or wait until tax time to get a big refund. If you opt for the Advance Premium Tax Credit, it will be based on what you declare to Massachusetts as your expected income for 2022. Come tax time 2023, if you received fewer tax credits than you should have based on your actual income, you'll get a refund -- and if you earned more than you declared, you'll owe some money back.

The best way to see how much you might qualify for in premium tax credit is by entering your zip and expected income at https://www.mahix.org/individual/. In addition, a plan purchased through Mass Health Connector may have lower co-pays and deductibles than health insurance purchased elsewhere.
posted by Theiform at 9:44 AM on October 1, 2021 [1 favorite]


What Theiform said: under ARPA, in years 2021 and 2022 there is no "subsidy cliff" or "cutoff" for tax credit subsidies, meaning that you will qualify for SOME subsidy so long as the "benchmark" (aka the second lowest silver) plan in your state costs more than 8.5% of your income. If the benchmark plan costs one dollar over your income threshold, then your subsidy will be one dollar, but still.

And you should be able to make some sort of attestation to the exchange (which may have to be supported by some evidence) about your expected income. You can also change your reported income throughout the year in order to change your subsidy amount -- this all gets reconciled with your taxes at the end of the year.

In addition, it's my understanding that you can purchase insurance through the exchange no matter your income level -- you just wouldn't, absent ARPA, qualify for assistance. It's worth at least price shopping on the exchange even if you ultimately go with a broker instead.
posted by gauche at 12:22 PM on October 1, 2021


Response by poster: Thank you all, this is very helpful. One followup question: as someone who is self-employed, what is my "income"? On my tax returns, there are multiple different things that could imaginably be considered my income, i.e. before self-employment tax, after self-employment tax, before I pay for my health insurance, after I pay for my health insurance, etc.
posted by Winnie the Proust at 1:47 PM on October 1, 2021


According to healthcare.gov it is your net profit as reported on your schedule C.

https://www.healthcare.gov/self-employed/income/
posted by muddgirl at 2:14 PM on October 1, 2021


The income you list should be your expected modified adjusted gross income -- your adjusted gross income plus any foreign earned income, social security benefits, student loan interest deducted from the AGI.
posted by Theiform at 4:54 PM on October 1, 2021


Also keep in mind that if you guess wrong about your future income, it's ok! Worst thing that happens is you have to pay some of the money back if they gave you more money for the premium tax credits than you ultimately qualified for based on your actual income. This is just a reconciliation if this happens, you're not in trouble.

DO keep on top of quarterly self-employment estimated taxes though. Otherwise you are not going to like your tax bill at the end of the year and may need to pay a (small) penalty.
posted by Bluebird Wine at 4:53 PM on October 2, 2021


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