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Don’t Forget about Your Health Insurance

Don’t Forget about Your Health Insurance

Work from home? Run your own IT business? Find out what you need to know about the ACA (Obamacare) requirements for IT independent contractors in 2015.

Thursday, February 26, 2015/Categories: independent-consulting

The day after Valentine's Day isn't just a great time for a stock up on marked-down chocolates – it's now the deadline to apply for health insurance before the Affordable Care Act penalties kick in.

Many IT workers are employed as freelancers and independent contractors, and if they don't have health insurance, they'll have to sign up for coverage by February 15 if they want to avoid a penalty.

Under the law, you aren't required to have health insurance, but you'll owe penalty if you don't get it. While there are some exceptions (generally for households with lower income), if you don't have health insurance by the deadline this year, you can expect to pay almost $1,000 in penalties.

Obamacare Penalties: If You Don't Sign Up for Health Insurance, What Do You Have to Pay?

Say you started your own IT contracting business this year. You left your old job and now have to get insurance on your own. As an independent contractor, you have three options:

  • Get insurance through your spouse's employer.
  • Sign up for insurance on your own (through Healthcare.gov).
  • Go without health insurance.

If you're young and relatively healthy, it might be tempting to skip health insurance. That's a risky move – one injury could cost tens of thousands of dollars in medical bills and you'll still have to pay an annual penalty.

Obamacare penalties can cost independent contractors a pretty penny, and those fines will increase in the future. In 2015, your penalty for forgoing health insurance is that you must pay the larger of these two amounts:

  • 2 percent of your income.
  • $325 per uncovered adult in your household ($162.50 for each child under 18) with a maximum penalty of $975.

An independent contractor making $40,000 would owe $800 (i.e., 2 percent of their income). However, if that contractor's household included a spouse and two kids, they would owe $975 ($325 + $325 + $162.50 + $162.50).

The downside to paying a fine is obvious: you pay money and still don't have health insurance.

When do you owe ACA fines? You'll have to pay this penalty when you do your 2015 taxes (by April 2016). It will be added to the amount of money you owe when you file, or it will come out of your tax refund.

What IT Contractors Need To Know about Health Insurance Requirements

Health insurance is complicated, but IT freelancers need to know three things:

  1. If you don't sign up for health insurance, you'll have to pay a fine.
  2. Given the average salary of IT contractors, you can expect to pay nearly $1,000 in penalties.
  3. The deadline to apply for insurance is February 15, 2015.

Remember that when you're self-employed, health insurance is a business decision. If appendicitis means you owe $14,000 in medical bills, you might be forced into debt. If your personal finances are tied to your firm's, you might be forced to shut down your business in order to take another job that offers health insurance.

For more IT risk management tips, make sure to follow the TechInsurance blog

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