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An Obamacare guide for freelancers and the self-employed
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An Obamacare guide for freelancers and the self-employed

heathy artists

Lately we’ve been attending a bunch of workshops geared towards helping various communities navigate the Affordable Care Act. It’s mostly for the Q&A’s– we know Obamacare as well as anyone, but it’s always helpful to hear what parts of the law are confusing to people who are new to the whole thing. At a recent ACA workshop for working artists we heard one question that was particularly hard to answer:

  • To get the subsidy to pay for insurance, you have to estimate your annual income. But what do you do if you have no idea what your annual income will be?

That’s a concern for anyone who freelances or is self-employed, and it makes navigating the new system particularly difficult for these folk. In this post, we explain why and offer seven tips that should make the process a little easier.

[UPDATE 11/9/15: The poverty level income figures we mention below have been updated for 2016.]

Why Obamacare coverage could be great for freelancers

Currently, about 17 million Americans work as either a freelancer, contractor, or owner of a micro-business. If you include temps and part-timers, it’s over 40 million people, or about a third of the U.S. workforce— and according to the most recent survey we could find (from 2006), almost 40% of them lack health insurance.

Anecdotes from freelancers show how hard it could be to get decent coverage before Obamacare:

On NPR, one freelance writer and editor described finding a plan that cost $600 per month: “It covered nothing. It was a huge deductible and literally, the first time you filed a claim you would be dropped.”

Writing in Salon, a freelancer with type-1 diabetes detailed an exchange with a health insurance representative: “’So are you trying to tell me that even if I were willing to give you a million dollars a month, you would still not let me join your health plan?’ I asked one representative. She said yes and hung up.”

Then there are the people who would rather freelance or start their own business, but are afraid to leave their current employer because it would mean losing their health insurance– a phenomenon known as “job lock.” According to a 2006 Watson Wyatt study, two thirds of top-performing employees said healthcare benefits were an important reason to stay with a company.

So, for current and future self-employed workers, Obamacare is likely a great deal– they’ll finally be able to find decent insurance without a traditional employer and often get help paying for it. But first, they have to get through the Obamacare application process.

Why applying for Obamacare coverage is less great

To shop for plans, first you have to estimate your annual income, and getting that right is important: if you overestimate, your subsidy might be too small, but if you underestimate, you might owe the IRS money when tax time comes around. (Or even worse, if you live in a state that doesn’t expand Medicaid and your underestimation puts your income below the poverty line, you won’t be eligible for any help paying for insurance.)

Yet, for many self-employed individuals, estimating annual income is all but impossible– it can vary wildly from month-to-month, year-to-year, depending on their luck landing assignments, contracts, sales, etc. One woman in the audience during an Obamacare for artists workshop I attended put it this way:

“The people who write these laws have no idea how things work in the real world.”

7 tips for the self-employed when shopping for plans

Even though navigating Obamacare can be a huuuuge pain for freelancers, the potential benefits are too good to pass up. Here are some tips that will help if you’re self-employed and applying for insurance on the Obamacare website.

1. Make sure you’re actually a freelancer/self-employed and not a small business

This might seem obvious, but just in case: if you have any employees (people you send a W2 at the end of the year) you’re considered an “employer,” and can buy insurance on the small business marketplace. If you just hire independent contractors for some work, then you’re still considered self-employed and you’ll only buy coverage on the individual marketplace. Healthcare.gov has more info here.

2. You won’t get in trouble if your income estimate is wrong

The government will try to verify your income when you apply for Obamacare coverage, but it’s mainly geared towards catching obvious lies or mistakes– for example a person who has a full-time job and says they’re unemployed. Here’s how it works:

In the 36 states using the federal exchange, the estimates of all applications are then checked against Internal Revenue Service and Social Security records, looking for large discrepancies. If the amount supplied can’t be confirmed through federal records, it will be checked against wage information employers send to Equifax, a credit reporting agency. After a rule change this summer, states that have built their own exchanges don’t have to check every applicant for 2014, verifying only a sample of participants, said Timothy Jost, professor of law at Washington and Lee University.

If the estimate still can’t be verified, the exchange will request additional documentation from the applicant.

If you’re a freelancer or independent contractor you can send them your most recent 1099’s or a self-employment ledger and the government should take your word that it’s accurate. Says Jost:

“Our tax system is largely an honor system. For most Americans, there’s no way you can verify in advance what your income will be in a year. All you can do is make your best guess.”

UPDATE: A bunch of people have been asking what a self-employment ledger is, since that’s one of the things the IRS says freelancers can provide to verify their income. For most states, there’s no official form– anything that clearly breaks down your income and expenses is a “self-employed ledger.”

For an example of a self-employment ledger that you can use as a template, one of the commenters mentioned that South Dakota has a good one here. Also, New York is one of the few states that includes a self-employment ledger form as part of its online Obamacare application– you can see a screenshot of that here. You don’t have to copy them exactly, but those should give you a good idea of what kind of info the IRS is asking you to provide in a self-employment ledger.

And for more on income verification, Consumers Union has a good guide here.

UPDATE 2: Another commenter has pointed out that you can use accounting software, like Quicken, to generate a ledger as well.

3. It’s probably better to estimate too high than too low, otherwise you could owe money later 

One reason the income verification isn’t more strict is that the IRS will reconcile your tax return with your Obamacare application at tax time. If you knowingly provided false information, you could face fines or even criminal charges, but if you simply guessed wrong you don’t have to worry. Also, if it turns out you were owed a bigger subsidy because you overestimated your income for the year, you’ll get that extra money in your tax refund.

The potential problem for freelancers is that if your income was higher than you expected, you’ll have to pay back the extra subsidy credit you got. There are some limits to how much you’ll owe the IRS if you guess wrong, which, like the subsidy itself, is on a sliding scale:

subsidy repayment limits

Those are still hefty tax bills, but it’s nice to know that you won’t go bankrupt if you get the estimate wrong. And if you really want to avoid owing money at tax time then you can either choose not to apply your entire subsidy to your monthly premium (again, you’ll get the leftover in your refund) or…

4. If your income changes, tell the insurance marketplace

A recent study in the journal Health Affairs found that the number of people owing repayments could be reduced up to 40%, and the median repayment reduced by 60%, if people simply report income changes to their Obamacare marketplace.

You can do this as often as you want, so if you land a bunch of new clients, or a big project ends, or you have a great month selling pirate guinea pig portraits on Etsy— log onto your state’s marketplace and let them know. (In reality this probably means every few months adding all your 1099’s and subtracting any deductions– more on those in a sec. We just wanted an excuse to use this picture:)

guinea pig captain

5. For those living in states that don’t expand Medicaid: If you overestimate your income, you don’t have to repay anything

True to the stereotype of the starving artist, many of the ones I’ve talked to have incomes hovering right around the federal poverty line (FPL- $11,770 for an individual). If you live in a state that doesn’t expand Medicaid and your income is below that line, you’re especially screwed– you’re not eligible for subsidies to buy private coverage, and unless you were eligible for Medicaid under the old rules, you can’t get that either.

But say you estimate that your income will be over the FPL and thus qualify a subsidy to pay for private insurance– if your actual income at the end of the year is lower than FPL, you don’t have to pay anything back. And in many cases the federal subsidy will be enough to cover the entire cost of private insurance on the marketplace.

Now to be clear, we’re not saying that you should lie to the federal government. But, if you live in a state that didn’t expand, and you’re not sure whether next year’s income will be above or below that line, you probably want to go with the higher estimate.

6. Keep in mind the exchange is asking for your Modified Adjusted Gross Income

The health marketplace isn’t asking for total income but something called Modified Adjusted Gross Income (MAGI): basically your Adjusted Gross Income (line 4 on 1040-EZ, line 21 on 1040A, or line 37 on 1040) plus a handful of other types of income that are explained here.

The Atlantic’s Garance Franke-Ruta explains why this distinction is especially important for self-employed workers:

The difference between gross income and adjusted gross income is not going to be huge for most people who are lower- to middle-class and get paid through W2s. But for people paid through 1099s and piecemeal work, adjusted gross income can be thousands of dollars lower than gross income, since it’s the figure that comes after all the Schedule C deductions (such as for home office, internet, business use of a phone, computer equipment, etc.).

She also notes that calculating MAGI is not easy:

If you’ve never lived in the world of piecework and Schedule C deductions, imagine saving all your expense receipts for an entire year and then having to do them before you can begin to calculate what your MAGI is. This is, in fact, exactly what has to happen. […]

In short, for the self-employed, applying for Obamacare subsidies can be as much fun as doing your taxes, because—depending on the state forms—it can actually involve doing part of your taxes.

Many freelancers and self-employed individuals find it’s easier to do their taxes quarterly anyways– if you do that, then just make sure to report it to the health marketplace too. If not, then when you’re estimating your annual income, keep in mind that the marketplaces are asking for something a little different from– and something that’s likely to be lower than– total gross income.

7. Take a close look at the “Silver” plans

Obamacare plans are ranked as bronze, silver, gold, or platinum, based on their out-of-pocket costs. Cheaper plans come with high out-of-pocket costs– a problem for everyone, but especially independent workers who might have long gaps with little or no income. However, if you make less than 250% of the poverty line ($29,425 for an individual), you’re eligible for reduced cost-sharing… but only on silver plans. For more info, check out our earlier post here.

The TL;DR conclusion

Here’s the main take-away: estimating annual income can be difficult if you’re self-employed, but it’s okay if you’re off. To avoid owing taxes later (1) estimate a little high (you’ll get the money back in your tax refund if you guess too high) and (2) if your income changes let your marketplace know.

{ 156 comments… add one }
  • John Nagle December 14, 2013, 10:48 am

    This looks like a very useful blog for those in the target categories.
    As I was surfing through it, I realized how thankful I am that I have medicare and don’t have to spend my time worrying about all these details. I think single payer would increase American productivity and quality of life, and not many people would miss not having to make so many choices and decisions.

  • Catena Creations December 21, 2013, 9:52 pm

    Thank you for posting this. I am a self-employed freelancer still trapped in this hell. I finished my application 2 weeks ago and finalized insurance for my son and me. Or so I thought.

    I had to provide income verification. My only option was the “self-employed ledger.” Of course, they don’t have a form to follow. So I gave it my best shot and posted it. Today I got a notice that said there were “inconsistencies” and I need “to provide additional documentation.” That’s it. No other directions or information.

    So I pulled out the profit and loss statment for 2012 that I did so I could refinance my house, updated it and created one for 2013. I went back to the site and it would not let me upload the documents. I have no idea what to do now.

    I have searched all over for an example of a “self-employed ledger” and cannot find anything that isn’t related to a specific state program. There’s no form on the site, and no one at the call center knew aything about it.

    And now you’re saying here that you have to estimate your income for 2014. I thought they were talking about what you would report in 2014 for your 2013 taxes! Have I done this all wrong?

    If anyone out there knows what a “self-employed ledger” looks like and can explain the details it needs to include, please reply and share this with me. Thanks.

  • Rob Cullen December 22, 2013, 8:02 pm

    So yeah, when the site asks for income it’s really asking you to estimate your income for 2014. But they expect you to base that estimate roughly on your past income, so that profit-loss statement you made will come in handy.

    The message about “inconsistencies” and “additional documentation” is maddeningly vague. Basically what happens is that the site checks the income you enter against your most recent tax return and if there’s more than like a 10% difference, it automatically asks for”additional documentation.”

    As far as I know, there’s no official “self-employed ledger” form– at least on healthcare.gov. Some states that are running their own exchanges include a form that freelancers/self-employed can use to estimate their incomes– you can see what New York’s looks like if you scroll near the end of this article: http://www.theatlantic.com/business/archive/2013/11/the-infinite-bewilderment-of-signing-up-for-obamacare-subsidies/281096/

    But for states using healthcare.gov there is no online form for freelancers, so basically anything that clearly breaks down your income and expenses is a “self-employed ledger.” It sounds like the profit-loss statement you made for 2013 would work– and if you expect your income to be significantly different in 2014, include an explanation.

    As for why it won’t let you upload after asking for additional documents, that sounds like a website glitch. I’d try calling the help number again– if they can’t fix it, they might have you snail mail the additional documents (I’ve heard it’s been taking people forever to get a response that way though). Or, worst case scenario– the site should let you trash your current application and start a new one.

    Hope this helps!

  • Barbara O'Brien December 27, 2013, 3:12 pm

    I am a freelancer, and I went through the New York state exchange and it took my word on my income. I didn’t have to submit any verification.

  • Decent Human January 2, 2014, 2:33 pm

    Catena Creations & Rob Cullen, I am running up against the same request for a self-employed ledger but they’re giving me til 4/2/14 to supply it.

    1. If you have an accountant, talk to him or her. Mine says we can get my income up to 100% of the federal poverty level simply by taking fewer deductions.

    2. Look through your schedules in your 2012 taxes. For me, Schedule E lists all the income and expenses, so I think it could work for a self-employment ledger. For you it will probably be a different schedule, but same idea.

    Good luck!

  • Marcia February 18, 2014, 1:41 pm

    I was employed until August 2013 and have a contractor business I decided to keep going after my husband’s passing in November of 2012. If I will have my estimate income for 2014 compared to my actual income in 2013 there will be a sizeble discrepancy (lees income in 2014). I dont want to loose the opprtunity of having a lower cost health insurance by overestimating it. Will I get fined for under estimating it? As of now the Marketplace thinks I make too much money to support a kid in college and another in high school.

  • Rob Cullen February 18, 2014, 2:48 pm

    @Marcia: See sections #2 and #3 in the post. There’s no “fine” for underestimating your income, but when you file your 2014 taxes the IRS is going to reconcile your actual income with the subsidy you received throughout the year. So if you underestimated your income, you’ll have to pay back the extra insurance subsidy you received; if you overestimated your income, you’ll get the extra subsidy you should have received back as a refund.

  • Nancy March 14, 2014, 5:11 pm

    I see a flaw in your reasoning on your Feb 18 post.
    When I just did my 2013 taxes I found that last year much to my shock I made too little to qualify for the marketplace plan. Had to cancel it after it just coming into play after a long delay (took from Dec to mid Feb to get any plan info or health card). So as requested I applied for Medicaid which I also do not qualify for as I live in a state that so far has not expanded it and it reviews your resources as well as your income (gee who knew that life insurance was a problem).
    Apparently all I qualify for is a fine 🙁
    I see no way to file a ledger for unknown income.
    Your logic flaw about payback is I think this – if you over estimate your income, get subsidized Marketplace health care and then fall below the income required to get a Marketplace subsidy and do not qualify for Medicaid it looks like you would have to pay back all the costs of the insurance you were not qualified for and being subsidized for at tax time for 2014. Maybe you can point me to a) a ledger or b) something that says it ain’t so…

  • Rob Cullen March 15, 2014, 11:48 am

    @Nancy: This is covered in section 5 above. If you overestimate your income and receive a subsidy, and then later it turns out your income is below the cutoff to qualify, you don’t have to pay any of it back. The source (which I link to in the post) is Kaiser Health News, who talked to law professors, a tax attorney, an insurance executive, and other healthcare experts to confirm this: http://www.kaiserhealthnews.org/Stories/2013/August/12/income-projections-low-income-Obamacare-state-medicaid-marketplace-exchange.aspx
    Anyways, it sounds like you didn’t have to cancel your plan. Even though your income in 2013 was too low, the subsidies are based on your 2014 income– if you think your income will be above the cutoff this year then you’d be fine keeping it.

  • Linda March 24, 2014, 1:30 am

    I googled self employment form and found a pdf file e0990v1. Can I use that one for this purpose, to file an exemption?


  • Rob Cullen March 24, 2014, 11:12 am

    @Linda: Sure that e0990v1 form would work as a self-employment ledger for submitting your income/filing for an exemption on healthcare.gov. I’m not sure how closely they’re scrutinizing these ledgers, so there’s maybe a chance they’d ask why you’re using a South Dakota state form if you don’t live in South Dakota, but I doubt it.

  • sarah March 26, 2014, 1:36 pm

    i applied for a plan for my husband and myself and easily got a great silver plan w bcbs but now need to verify our income. i plan on sending in a copy of my 2013 taxes, we are self employed. i overestimated our income for 2014 at 28500 for a family of 4, my kids were approved for state medicaid and we got a great size subsidy. now that my 2013 taxes are actually complete its showing that after our business deductibles our adj gross income is almost 1/3 of what i est for 2014 and i dont c that changing on this years income. so the actual amount we brought home is about 10000. i had no idea about the underqualified poverty level thing where i could end up w no ins at all bc i made too little money and dont qualify for state ins either, can u expand on that and where do i find that info. i live in oklahoma.

  • Rob Cullen March 26, 2014, 2:13 pm

    @sarah: We did an explainer on the Medicaid expansion here: http://whatifpost.com/the-medicaid-expansion-explained.htm The gist is that when Congress passed Obamacare they expanded Medicaid to cover everyone making less than the federal poverty line (for a family of four that’s $23,550), so help paying for private coverage is only available to people making more than that. Later, the Supreme Court made Medicaid expansion optional for states, so if you live in a state like Oklahoma that chose not to expand then there really aren’t affordable options (your kids should still be eligible for Medicaid though, because they would have been eligible without the expansion).

    If your income goes up during the year and looks like it will be above that $23,550 cutoff, you should be able to go back onto the exchange to get coverage then (a major change in income counts as a qualifying life event that would allow you to get coverage after the March 31 deadline).

    By the way, that $23,550 is just for families of four. If you want to see what the cutoff is for other family sizes, we have more info here: http://whatifpost.com/wondering-if-your-income-is-above-or-below-obamacares-medicaid-cutoff-read-this.htm

  • j. kennedy April 2, 2014, 11:50 am

    I have to send in income verification to the marketplace and am sending in a copy of my 2013 taxes. i am self employed family of 4. Last years income was much less than the required 23500 to get a plan, but i do estimate this years income should be higher than last years. How do I explain to the marketplace my income will be greater than 23500 this year with my 2013 taxes showing i only made 17000. Do I need a self employment ledger?

  • j. kennedy April 2, 2014, 11:56 am

    oh by the way i already have plan im enrolled in, a silver plan for my wife and i and my daughters were approved for chip.

  • Rob Cullen April 2, 2014, 1:07 pm

    @j. kennedy: Yep, a self-employment ledger would be the way to go if it shows that you’re on track to make more money this year than you did last year.

  • j. kennedy April 2, 2014, 2:49 pm

    do you know where to find one of those for oklahoma? im actually not sure what that is.

  • Rob Cullen April 2, 2014, 3:31 pm

    @j. kennedy: If you scroll up to my reply to Catena Creations there’s a longer explanation, but for most states there is no official “self-employment ledger” form. It’s just anything that clearly breaks down your income and expenses. If you want to see an example of a self-employment ledger that you can use as a template, one of the other commenters mentioned that South Dakota has a good one here:


    Also, New York is one of the few states that has an self-employment income form as part of it’s online Obamacare application– there’s a screenshot see here: http://cdn.theatlantic.com/newsroom/img/posts/2013/11/_1/941890f6c.png

    As far as I know, there’s nothing specific for Oklahoma, so you’ll probably have to make your own ledger, but those examples can at least show you what one looks like and what kind of information to include.

  • Sandra June 24, 2014, 11:14 pm

    I don’t know if you are still answering questions but, what the heck, can’t hurt to try.

    We are actually considered an employer because we have one employee which is our son. Unfortunately, we have decided not to renew our insurance because we just can’t afford the premiums anymore (2000.00 per month for 4 people). Our intention is to move to the exchange but we are in the gap. Our state did not expand medicare and we make too little for a subsidy. However, looking at our 2013 taxes, we took the self-employed healthcare deduction that added up to 15,500. If we move to the exchange, we will not be taking this deduction and if we add that to line 37 of our 1040 we would have enough to qualify for exchange insurance with a subsidy. The problem is, because of our contract dates, we will not be without insurance until August 1st so we will still have paid the premiums for our current policy for 7 months of 2014 which adds up to 9450.00. Should we disregard this deduction so we show more income for 2014 or is there some way to explain that if purchasing insurance through the exchange we will no longer be taking this deduction but that the increase in income won’t begin until August.

    I hope I have explained this clearly enough. I’m confused myself.

  • Rob Cullen June 25, 2014, 7:31 pm

    @Sandra: Yep, we’re still taking questions and I think I understand what you’re asking…

    When you apply for coverage on the exchange, first it will ask if your 2014 income is the same as it was last year (or something like that, depending on the state)– you’ll probably want to say “no” since it will automatically use your tax info from last year, which includes that $15,500 deduction making your income too high. Then it will ask you to estimate your 2014 income– when you do that, you can just report your estimated income without the self-employment health insurance deduction.

    It might ask for additional documentation to back up your estimate– for that you can use your most recent 1099s, your most recent profit-loss statement, a self-employment ledger, etc. If you decide to submit a self-employment ledger, you could either leave out the cost of your old insurance, or include an explanation that you’ll no longer be paying that $2,000/month, so your net income for the rest of 2014 will be that much higher.

  • Erika July 1, 2014, 11:56 am

    Thanks for the very helpful, useful info and links in this blog!!

  • St.Jon Clark July 2, 2014, 3:56 pm

    I just spoke to the helpline and they said I could use any accounting software generated ledger. I am just starting up a freelance business this year and had no income for the last 2 years so didn’t have to file income tax. So you can use Quicken or something similar and generate a ledger to send in.

  • Olivia July 7, 2014, 9:03 pm

    When creating a self-employment ledger and looking at expenses, do they expect the expenses to be itemized as they would be when doing taxes? My Funds Received are easy enough to come up with as I have bank statements showing deposits made (I only accept checks), and so I can accurately list these from January through June, and planned on using an average of these 6 months as an estimate for July through December. But when it comes to expenses things get a little tricky. Not only do I have MANY little expenses each month, but part of my deductions are percentages of utilities and phone usage and so forth as I have a home office and travel for work in my personal vehicle. I rely on a CPA to do my taxes and thus can only make a rough estimate of these expenses in particular. I’m hoping that I can list one number for income and one number for expenses (also averaging expenses for the next 6 months based on the first 6) but if this is not adequate then I will basically have to pay someone to do half a year’s taxes, not to mention uploading a file many pages long to include all of my expenses individually. Extremely frustrating and time consuming and costly if this is the case. I would love to use my tax return from last year but it would put me below the FPL at only 11,200.00 and I live in a state that has not yet expanded medicaid. Thanks very much for your help. Perhaps I should not have waited for a week out on when they wanted the further information…

  • Rob Cullen July 8, 2014, 9:05 pm

    @Olivia: From what I’ve been hearing, it sounds like they want a more detailed breakdown than just a single number for all payments received and one for expenses–if you can’t easily provide the exact numbers though, rough estimates should be fine. Really they’re just trying to make sure that you made a “reasonable” effort to estimate your income and that you’re not “knowingly and willfully” trying to mislead them (that could get you in trouble). Just keep in mind that they will reconcile everything at tax time, and if you’ve underestimated your income you’ll have to pay some of the subsidy money back.

  • Jackie July 12, 2014, 2:01 pm

    Oh good, you’re still helping the dazed and confused. So definition of “Self-employed”??? I have one major company for whom I work approximately 12-20 hours a week on a contract basis. They do deductions for taxes. Is income considered before tax or after tax amount? Also, in filling out that dratted self employment ledger, what expense column headings are necessary, the expense of the percentage of house/car/phone is an annual amount not monthly. Seems way too detailed to list all that are included on tax forms. Appreciate any input.

  • Rob Cullen July 15, 2014, 11:18 am

    @Jackie: For the income estimate, they’re asking for your modified adjusted gross income, which is before taxes (see #6 above for more info). As for the self-employment ledger, they don’t say what specific expense column headings are necessary. It’s basically up to you what you include, although the more specific you can be, the better, since it’ll be closer to your actual income at the end of the year. For the annual expenses you mentioned, you could just divide by 12 if you’re trying to fit them into a monthly ledger.

  • Sarah July 15, 2014, 9:47 pm

    Thank you for that!

    That was one of the most straightforward and informative blog posts I have EVER READ!

    I appreciate what you put together. Thanks to you, I had the information needed and the confidence to crank out my first ever Self Employment Ledger!

    Seriously. Thank you.

  • Rob July 19, 2014, 9:59 am

    I am currently enrolled in a silver level plan, i have used my health care at the doctor and recieved EOB statements. I am now getting the letter about proving my income with a self employment ledger

    If I choose not to craft a ridiculous self employment ledger what are the concequences? Will my policy be cancelled? Will my subsidy go away and my insurance co. will bill me more money?

    I am thinking about just waiting until april 2015, and any differences would get paid or credited then.

  • Rob Cullen July 21, 2014, 2:11 pm

    @Rob: If you don’t send in the self-employment ledger (or whatever additional info they ask for to verify your income) they won’t cancel your policy, but they could either end your subsidy or change it to match the information they already have on file for you (probably your income from last year’s tax returns).

    So yeah, there’s a good chance that the insurance company will bill you more money if you don’t file the ledger now, although you’re right that if your owed a subsidy you should get that back when you file your taxes.

  • Bob July 22, 2014, 12:59 pm

    My 50 y/o girl friend received the same letter. We live in a state that didn’t expand medicaid (Florida), so we guessed as did everybody else on how much she expects to make. She does some contract work, but the problem is she is going through the process with Social Security to get disability. Would her application and forms fot SS be satisfactory for the marketplace ?

  • Rob Cullen July 22, 2014, 1:35 pm

    @Bob: For that I ‘m not sure– my guess would be no, at least not until her Social Security stuff goes through, since it’s not actual income right now. When it does go through, you could go back onto healthcare.gov and report a change in income to get the subsidy. But to find out for sure, I’d suggest calling the helpline– the number is on the website here: https://www.healthcare.gov/contact-us/

    If they don’t know, I would try submitting the SS forms with her other income verification stuff and just see what they say.

  • Susan D July 25, 2014, 4:30 pm

    In trying to assist many individuals and self employed people, I find a consistent issue. You have addressed it slightly in section 5 with regards to overestimating income. But what happens to those who over estimate in a state that DID expand Medicaid? Many self-employed have incomes that fluctuate enough to have them bouncing in and out of the Medicaid eligibility threshold. Most do not actually want Medicaid. So using the look back approach over the past couple of years income and apply it to the current flow of business in 2014 they estimate that the income will be above the FPL/Medicare threshold and thereby qualifying them for a subsidy. When 2014 taxes are filed if they should actually not been above the threshold and would have qualified for Medicaid, what happens? Will they owe back the subsidy (since the state did expand Medicaid)?

    On the flip side: There are also many “successful” self-employed people who simply show no income or operate at a loss. It is my understanding that they would and could qualify for Medicaid because there is not an “assets” test. So regardless of the fact that they have large assets they are able to pay far less or nothing for healthcare. Support or not support the law; there is no way the spirit of the law was intended to have these people on Medicaid or even qualifying for subsidies while fixed income/w-2 employees living far below the standards are qualifying for less, nothing or paying large contribution to employer plans. Would welcome your input and thoughts.

  • Rob Cullen July 25, 2014, 7:06 pm

    @Susan D: No, if someone overestimates their income and finds out when they do their taxes that they would have qualified for Medicaid– even if it’s a state that DID expand– they still won’t have to repay the subsidy. You only have to repay the subsidy if you underestimate your income.

    As for the second part, the idea behind not having an assets test is that low and middle income people shouldn’t have to lose their house, car, or life savings to get health coverage. Also, the vast majority of self-employed people who show no income or a loss on their taxes are not “successful”– they really did make that little. I guess some wealthier people could use creative accounting to qualify for Medicaid (although as you point out, most probably don’t want it) or subsidies, but that’s not a problem specific to the health law- they’re also not paying their fair share of taxes either. The solution, it seems, would be to make it harder for people to show a loss on their taxes when they’re actually doing quite well, rather than institute an assets test for health coverage that would apply to huge numbers of actually low/middle income folks.

  • David M August 10, 2014, 12:49 pm

    To carry Susan D’s question a bit further:
    I have been a student for the past three years, training for a 2nd career (with no income during my studies), my wife is a sole proprietor and earns a small income, putting us squarely under the FPL. We do not want or (given our assets) need Medicaid coverage, but do need the subsidy available for a silver plan. Given that I was to be graduating and looking for work within a five months of signing up, and after speaking to several Exchange representatives, I gave an over-estimation of income (one that I felt I could meet once graduated and employed) to qualify for the silver plan (with subsidy), which we have had since. As I now understand it, even if I don’t get work right away and earn enough to bring myself above the FPL, I won’t have to repay the subsidy, but I’ve received, and continue to receive, notices from the exchange and, now, from my insurance carrier saying that if I don’t provide proof of income within the next two weeks, I may lose my subsidy and/or my coverage. I have, for months, spoken to Exchange representatives and sent a letter for the record explaining my situation to them, all to no avail. How do I keep my coverage until I can find work that will allow me to provide them the documents they require? The reps and supervisors at the Exchange are unaware of any time extensions that could help me and, in fact, told me that they have no idea what will actually happen in two weeks, as they have no instructions on how to proceed with cases in which documents are required but not furnished. Is there a section of the law that I can direct them to that will satisfy them, or take any other track with them that will extract me from between the rock and the hard place I’m currently in?

  • Rob Cullen August 12, 2014, 1:35 am

    @David M: As far as I know, there isn’t a section of the law that would help you keep the subsidy. Under the law, they have to verify your income, and until you find a job, you have no way to show (and really no way of knowing for sure) that your income will be higher later in the year.

    You can maybe wait and see what happens if you don’t provide the documentation, but like I told the other commenter, they’re supposed to either end your subsidy or recalculate it based on whatever info they do have on file (which sounds like it also would end the subsidy in your case). If that happens and Medicaid is available where you live, my suggestion would be to go with that for now, then whenever you find a job report your new income to the exchange. You should be able to buy a new plan then.

  • Danya November 23, 2014, 2:00 am

    What about all the farmers? We don’t make monthly income. We literally make our money a few months out of the year (like 3), and manage our money wisely. Farmers have always gotten a different set of rules die to this type of income. Help :)!

  • Rob Cullen November 24, 2014, 2:11 pm

    @Danya: Even though the insurance subsidies are handed out monthly, what the IRS is really concerned with is annual income. So to calculate your monthly income, you can just take your expected annual income and divide by 12.

    Another option is just using your current income and when it changes for those few months, report it to the exchanges. Just keep in mind that in your situation (1) you might have to pay back some of your subsidy around tax time, since it will look like your annual income is much lower than it actually is for most of the year; and (2) if your income is below the poverty line for the months when you’re not making money, you wouldn’t qualify for subsidies (depending on the state you might qualify for Medicaid though).

    Really in your situation, I’d talk to a navigator first– they can look at your income and tell you which way to report it makes the most sense. It’s free, and you can find one near you here: https://localhelp.healthcare.gov/

  • Rob Cullen November 24, 2014, 2:18 pm

    Also, a couple comments on this post got lost when we switched over to a new server a few days ago. If you left a comment/question recently and don’t see it here, feel free to leave another!

    I know that one person had asked about 401(k)’s. Money that you leave in a 401(k) doesn’t count as income for the purposes of calculating the subsidy. However, if you’re retired, know that money that you withdraw does count as taxable income, so you should include it.

  • Michelle December 6, 2014, 10:04 am

    Hi Rob,

    I live in Missouri and I am 59 years old and self employed and clean homes. I was also asked to send them a self employment ledger for 2014 when I went into the marketplace to look at plans since my Silver Plan I have now will be increasing in cost. I had a message that said based on my past tax information and the information I provided on my marketplace application it appears I might have experienced a change in income. Ok..lets start from the beginning. When I first talked to a navigator in Oct.2013 I told her that my gross income was 14,670 and my AGI was $2,045.00. She said that they would be using the $14,670 amount. This didn’t make sense to me since I have deductions and expense of running my business out of my home. I told her that I wanted to be sure that this was correct since I have all these deductions that I claim on my schedule C. Again she said the amount that needed to be used would be the $14,670. Right now it looks like to me with just claiming one person that I would not qualify at all for the insurance. I believe since now they have been able to look at my 2013 taxes and see that my AGI was $2,045.00 after my deductions that I shouldn’t have qualified at all in the first place. My question to you is am I correct that I shouldn’t have qualified for it in the first place? I don’t qualify for Medicaid in Missouri since I don’t make enough income to qualify. I called the Marketplace and cannot get a straight answer and they just tell me to send them the 2014 ledger by Feb.2014 or my insurance could be canceled.

  • Rob Cullen December 7, 2014, 1:06 am

    @Michelle: It sounds like the navigator was probably wrong– the marketplaces calculate your subsidy based on Modified Adjusted Gross Income, which is usually pretty close to AGI. And yeah, if your MAGI is $2,045 that’s not high enough to qualify for a subsidy. But you can see what they say when you send the ledger.

    Keep in mind too, it also depends what deductions you take– for example, if you were deducting the cost of health insurance in 2013, your MAGI in 2014 could be higher since you might be paying way less for insurance under Obamacare- and thus deducting less.

  • Michelle December 10, 2014, 2:54 pm

    Hi Rob,

    I got back on the marketplace site and searched again. It does state on there for people that are self employed that the income to use on the marketplace would be as follows. If your self employment income is higher than your business expenses you report this net income and if you business expenses are higher than your income you report a net loss. Also, I did not use any cost of health insurance for deductions in 2013. The only difference would be that I used $14,400 for 2013 income and it was actually $14,600 which is only a $200 year difference there. So I think that is why the navigator took the $14,400 amount to put in to figure what my subsidy would be and it might have been done correctly. In my 1st post above I said that I gave her the amount of $14,670 which is incorrect since I gave her $14,400 after I went through all my notes taken at the beginning of this nightmare in Dec.2013! Now I am just trying to find the right format to do my ledger with since I use turbo tax to do my taxes and it figures everything out for me and I just have to put in the expenses.

  • Jessi December 12, 2014, 12:49 am

    My husband owns a small commercial cleaning franchise and I am a stay at home mom. We qualified and were told we could provide our 2013 tax return as proof of income. It seems that everyone is being required to do the self employment ledger and I see no mention of tax returns…am I missing something?

  • Rob Cullen December 12, 2014, 12:18 pm

    @Jessi: Can you clarify– are you asking why it seems like everyone in the comments here was required to do a self-employment ledger, while you only had to provide your tax return? Or are you saying that when you went on the site this year it no longer lets you use last year’s tax return as proof of income?

  • Tom December 12, 2014, 4:30 pm

    What a great blog post with easy to understand information! I wish I’d read this last year when I was searching for info.

    I do have a question though, and think it’s really great that you’re still around answering them. Last year, I signed up for a silver plan and estimated my costs as a self-employed independent contractor whose income varies. As it turned out though, I was close enough. But when I went to sign up for 2015 this month for the same plan, it said the same thing a lot of these other people have been told – that I now need to provide proof of income. It gave me a large list of things I could provide, but I noticed the ledger as seeming the easiest, and googling info on it is what brought me here.

    With the ledger, I’m worried that they’ll reject it and it also seems time-consuming (my budgeting is not that fine-tuned). I called the healthline and they knew nothing – the woman told me the ledger meant “providing proof of income” and we just went around in circles from there.

    Here’s what I’m wondering – I have until March to get this resolved it says. Can I just wait until I do my taxes for 2014 then send that to them? That seems like it would be perfect, though the woman I called said she didn’t know and to just send “proof of income” without ever being able to clarify.

    2014 was my first year working mainly as an independent contractor and so my taxes are going to be stressful enough – and I’m still not sure if I should’ve sent in quarterly taxes or not but I guess I’ll find out soon. But I’d love your opinion on my situation, thanks.

  • Rob Cullen December 15, 2014, 6:01 pm

    @Tom: So, at least according to healthcare.gov, tax returns are something you can use to provide proof of income:


    I think maybe the reason the application itself doesn’t mention tax returns is that it automatically checks what you put down against IRS records. It’ll only ask for proof of income if they don’t have records for you or if your estimate doesn’t match their records– and in that case sending your tax return probably wouldn’t help since it would just show what they have on file. But in your case, if you expect your income to be the same in 2015 as it was this year, then sending your 2014 tax return should be fine.

    Unfortunately I can’t give you a definitive answer– other than what it says on the website, I haven’t seen any official rules about what they’ll accept, but the sense I’ve gotten is they’re not being overly strict about it.

  • William December 15, 2014, 6:15 pm

    Hi Rob,
    I live in Missouri, and I am self-employed as a courier. My wife and I applied at healthcare.gov in March of 2014. I am pretty sure that I didn’t calculate my income correctly for 2014 and I will probably have to pay the difference when we go to do our taxes. I will have an increase in my income for 2015. My wife is unemployed, but she will probably employed soon. I’m trying to estimate my income for 2015. My gross estimate income is $28,595.56, and the only expense I have is for gas – about $5000.00. When our taxes were done for the year 2013 our federal adjusted gross income showed a loss of -$2483.00 based on the $0.56/mile gas tax. When I talked to someone at healthcare.gov, she said to show the loss. Really confused as to what income amount I should use to apply. Thanks for your help!

  • Rob Cullen December 15, 2014, 7:12 pm

    @William: You’re supposed to use your adjusted gross income (well, technically your modified adjusted gross income, which is your AGI plus a handful of income types and deductions that won’t apply to most people– you can see them in the last two boxes here if you’re curious: http://laborcenter.berkeley.edu/pdf/2013/MAGI_summary13.pdf For the purposes of the estimate, adjusted gross income is usually fine.)

    Anyways, it sounds like the navigator was right– you’d report what you think your income will be in 2015 after the mileage deduction.

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