In less than two months (10/1/13), the Federal and State health insurance exchanges will go live as part of the implementation of the Affordable Care Act (aka: “ObamaCare”). This is great news for W2 technology consultants that work on a contractual basis through a 3rd party, or via 1099 freelance arrangement.

The Dilemma

As most tech workers know, many companies nowadays do not directly hire their employees. For example in software development companies, Developers, Project Managers, Documentation Writers, and Quality Assurance Analysts sometimes get hired by a recruiting house, which places the worker at a client site. Since these clients pay the recruiting houses for worker services and since the recruiting houses pay the workers via their payroll, it is up to the recruiting houses to offer health insurance to their technology consultants. Unfortunately, many recruiting houses do not offer health insurance to their consultants, leaving them to secure individually-rated coverage at extremely high prices. Fortunately, this consultant need will be addressed through the ACA implementation.

The Solution

The ACA creates a new insurance “pool” of individuals within a specific geographical area in any given state, accessible through State or Federally-run insurance “exchanges”. For example here in downstate New York, there will be a new individual pool for Long Island, New York City, and mid-Hudson valley residents. Since these new pools establish a larger subscriber base for individuals, coverage obtained through the exchanges will yield much lower prices for those seeking coverage as compared to today.

What Is An Exchange?

A health insurance “exchange” is an online marketplace where individuals can shop for an insurance plan that meets federal guidelines as per the Affordable Care Act. The purpose of the exchange is to provide consumers with a choice of varying affordable plan types, from multiple insurance companies that choose to participate in it. These will be run at the state level, or at the federal level.

How to Obtain Coverage?

Depending on what state you live in, one will be able to secure health insurance through either a federally-run or state-run exchange. For example, New York and California will have their own state exchanges. Other states however (for example, New Jersey) will defer applicants to a federally-run exchange. Health insurance consumers can check here to see where they need to go to obtain health insurance based on their state of residence.

Here in New York, residents of the state will be able to enroll through the NY Health Benefits Exchange (NYHBE) in a couple of ways:

-Self-enrollment directly with the NYHBE (contacting state government employees for enrollment assistance, but who cannot provide plan recommendations)
-Through a certified Producer or Broker of the NYHBE (who can also provide plan recommendations based on individual needs)


Open enrollment of all federal and state-run exchanges are scheduled to go live on October 1st, 2013, with first day of health coverage beginning on January 1st, 2014.

“Eh, I Won’t Need It”

According to the government, yes you will. In fact, you will have no choice in the matter…

Remember, the government is depending on as many uninsured people to enroll into the exchanges as possible. The more people enroll, the more costs get driven down (an insurance concept known as the “Law of Large Numbers”). Knowing that some people will choose to not elect to write a health insurance policy for themselves (as many do today), the government took steps to prevent this from happening.

Enter the Individual Mandate…a provision of the ACA (beginning on 1/1/14) that requires all individuals have a qualified health plan in force, or they will be subject to a tax penalty. Since technology professionals will not be exempt from this due to them being high income earners, the tax penalties will be quite stiff, and they’ll have nothing to show for it. Lower income workers may be entitled to a tax funded subsidy to help with premium costs (details to follow in the near future).

The good news is that catastrophic-only and HSA-qualified, high deductible health plans may be available through the exchanges (not known at this time). This will allow consumers to elect health plans with high out-of-pocket costs, where they can bank their premium savings into a tax-deferred account known as a Health Savings Account (HSA). Consult your tax professional for more information regarding the ACA Individual Mandate and HSA’s, and what it will mean for your personal finances.

We will provide more information from the government and the carriers as it is received. You may wish to subscribe to this blog page via RSS feed to receive live updates in your email clients.

*Disclaimer* This content is provided solely for informational purposes. It is not intended as, and does not constitute, legal or compliance advice. The information herein should not be relied upon or used as a substitute for consultation with legal, accounting, tax, and/or other professional advisors.