Obamacare for Owner-Operators and Independent Contractors

Phil Cohen

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The Affordable Care Act will create new options for owner-operators and independent contractors to purchase health insurance, though it also poses some important questions.

Owner-operators and independent contractors are classified as “self-employed” and as such have not qualified for employer-provided health coverage. While some receive coverage through a spouse’s employer, others are turned down due to pre-existing conditions and have gone on without any type of insurance.

Obamacare changes the playing field. Insurers cannot deny policies or charge more for a pre-existing condition. At the same time, the individual mandate means that previously uninsured independent contractors will be required to purchase insurance or face annual penalties.

Each individual should carefully consider the choices and consequences they have before deciding on a course of action:

Opt out of insurance. Some independent contractors and owner-operators may find it more cost-effective to pay a penalty rather than shell out a monthly insurance premium. The penalty for the first year is the greater of $95 or 1% of taxable income; it jumps sharply in the second year to the greater of $695 or 2.5% of taxable income.

Continue receiving insurance through a spouse. If you already receive insurance through your spouse’s employer, it may be wise to stay on their plan. However, many employers are raising employee contribution levels in order to curtail their own costs. It may actually save you more money in the long run to purchase insurance through the exchanges or, as noted above, to go without.

Purchase insurance on your state’s online exchange. The plans offered by each state’s exchange are classified in four primary tiers, with higher premiums but better coverage as you ascend. The government is offering a tax credit to eligible consumers that will lower the cost of premiums, as well as additional out-of-pocket cost reductions to those who further qualify.

The special complication of being an owner-operator or independent contractor, of course, is that you do not have a set income to determine eligibility for assistance. You may still qualify, though you should be diligent in accurately reporting your income situation to the exchange.

  • Underestimating your income may qualify you for a tax credit in the beginning, but you may have to pay some or all of it back at filing time.
  • Overestimating may make you ineligible initially, but you may receive the credit at filing time if your actual income falls within the eligible range.

Whatever your circumstances, you should report changes immediately to save yourself a headache at tax time.

Healthcare coverage is particularly important for owner-operators and independent contractors, who may lose their entire livelihood if they are sidelined by an illness or injury. Invoice factoring can provide immediate cash flow for owner-operators and independent contractors to pursue the right healthcare option and protect themselves without straining the pocketbook.

Learn more about EZ Invoice Factoring’s factoring programs and contact us today for a free quote!

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Phil Cohen

Phil is the owner of PRN Funding and sister company Factor Finders. He has been an authority in the factoring industry for over 20 years, serving on the board of directors for several factoring associations.


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