Update:  As we noted when first posting this article, the American Health Care Act had a long journey before becoming law. As of March 24, 2017, it’s even longer–and more doubtful.


As we’ve noted numerous times, under the Affordable Care Act (Obamacare), businesses with fewer than 50 employees are not required to provide healthcare insurance to workers. We have also noted that the ACA has helped grow the on-demand economy because it gives one-person businesses (also called, “self-employed,” “freelancers,” “sole proprietors,” etc.) access to healthcare, even if they’ve had a prior health condition that would have, in the past, prevented them from obtaining affordable insurance. Currently (March, 2017), the House of Representatives leadership is striving to pass by April a plan to replace the ACA. Known as the American Health Care Act, the legislation still has a mountain to climb to become law as it must pass, in addition to the House, the U.S. Senate. Here is a snapshot summary (and it has to be a snapshot because the legislation keeps changing) from Steve King, a partner at Emergent Research and a regular contributor to SmallBusiness.com.


Preview of self-employed insurance coverage under the AHCA

No doubt, the AHCA legislation (or, as some are calling it, Trumpcare) will change before it is finalized. And then, any legislation passed by the House must also pass the Senate. But there is enough information in the core proposal to gain a general sense of it impact on self-employment. Here are two top points:

  • Self-employed individuals who are older or have lower incomes will likely see a negative impact on their coverage.
  • The law will likely not have a major impact on the total number of people who are self-employed, at least over the next 3-5 years.

Why? Obamacare provisions that are important to the self-employed are included in the AHCA (as currently outlined). In particular, the Obamacare rules requiring insurance companies to cover pre-existing conditions are still included in Trumpcare. Also, the “no lifetime coverage cap” will still apply.


How Obamacare has been good for freelancers

Based on data from the MBO Partners State of Independence study, the percentage of full-time independent workers with health insurance has increased significantly since passage of the Affordable Care Act. Also, before Obamacare, many potential independent workers may have stayed with a large company in order to have access to healthcare coverage.

64% | Percentage of independent workers in 2014
83% | Percentage of independent workers in 2016

Three major differences between Obamacare and Trumpcare that impact the self-employed

1 | Tax subsidies

As the Kaiser Family Foundation chart below shows, there are winners and losers under the ACHA as currently proposed. Younger and higher income people tend to do better, older and lower-income people tend to be less subsidized.

The group most negatively impacted–as indicated in the chart–will be older self-employed workers who have a relatively low income. Many of these people will unlikely be able to afford health insurance. However,  lower premiums will likely encourage younger self-employed to sign up. The proposed legislation allows insurance companies to charge up to five times the premium amounts for older people than younger people. This is a big shift from the three times currently allowed under Obamacare.

2 | Reduction in Medicaid support

This potentially has a negative effect on the self-employed with low income. This provision kicks in after 2020 and will vary by state, so it’s too early to predict the extent to which it will impact self-employment. But it’s hard to imagine a scenario where this shift is good for the self-employed with low incomes.

3 | Elimination of the health insurance mandate

According to the assesment of the AHCA by the Congressional Budget Office (CBO), this provision will result in larger numbers of younger and healthier self-employed choosing not to buy health insurance. The non-partisan CBO is forecasting 14 million fewer people will be covered by health insurance in 2018 if the ACHA passes.

Resource | The Kaiser Family Foundation provides this interactive chart that looks at the ACHA by income, age and state.

<a href=’http://wpcomwidgets.com/?wpcom_origin=https%3A%2F%2Fkaiserfamilyfoundation.wordpress.com’><img alt=’Tax Credits Under the Affordable Care Act vs American Health Care Act, in 2020 ‘ src=’https://public.tableau.com/static/images/Ta/TaxCreditsUndertheAffordableCareActvsAmericanHealthCareActin2020/TaxCreditComparison/1_rss.png’ style=’border: none’ /></a>

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