The quick summary is self-employed who are younger or have higher incomes will likely be better off under the Republican proposed American Health Care Act (AHCA, a.k.a. Trumpcare).
Self-employed who are older or have lower incomes will likely be worse off.
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.
The reason is most of the Obamacare provisions that are important to the self-employed - and those thinking of becoming self-employed - are maintained by the AHCA (at least so far). In particular, the Obamacare rules on pre-existing conditions and no lifetime coverage cap still apply.
The AHCA legislation will likely change before it's finalized. But there is enough information to get a general sense of its impact on self-employment.
As we've stated in the past, Obamacare's been good for for freelancers, the self-employed and other independent workers.
Based on data from the MBO Partners State of Independence study, the percentage of full-time independent workers with health insurance has increased from 64% in 2013 to 83% in 2016.
There are three major differences between Obamacare and the ACHA that impact the self-employed. The first is the amount of tax subsidies people get under the two plans.
As the Kaiser Family Foundation chart below shows (click to enlarge), 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 worst case scenario - as is clear from the chart - is being older with a relatively low income. Many of these people are unlikely going to be able to afford health insurance.
The ACHA also likely will mean increased premiums for older self-employed in general.
The reason is the proposed legislation allows insurance companies to charge up to 5 times the premium amounts for older people than younger people. This is a big shift from the 3x currently allowed under Obamacare.
This makes sense from an insurance perspective. Older people are much more expensive to cover than younger people. Lower premiums will also encourage younger people to sign up.
But higher premiums for older people, which are likely to happen, will be hard on aging baby boomers.
The second major difference between the ACHA and Obamacare is a major reduction in medicaid support.
This potentially affects the self-employed with low income. This kicks in after 2020 and will be vary by state, so it's too early to understand 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.
The third major shift is the elimination of the health insurance mandate.
This will likely result in larger numbers of younger and healthier self-employed choosing not to buy health insurance. This is highlighted in Congressional Budget Office's (CBO) assessment of the ACHA and is a key reason they are forecasting 14 million fewer people will be covered by health insurance in 2018 if the ACHA passes.
In summary, the ACHA results in self-employed winners and losers.
Based on what we currently know, we would expect to see the percentage of self-employed covered by health insurance to fall under this plan, but not substantially - at least over the next 3 years.
Most of this decline will come from younger, healthier self-employed (under age of 40), who choose not to get health insurance due to a lack of the mandate.
In terms of self-employment in general, we aren't expecting a major impact over the next 3-5 years.
The ACHA continues to make health insurance portable and detached from traditional employment. It has winners and losers and we would expect the differences by cohort would effectively be balanced out in terms of the total number of self-employed.
We'll have more on the ACHA and how it will likely impact the self-employed and small businesses as the legislation and its impacts become clearer.
In the meantime, the Kaiser Family Foundation is an excellent source of information on this topic. They have a very nice interactive chart that looks at the ACHA by income, age and state.
Comments