Afford your Life: Small Business Obamacare Tricks

If you're running your own business and have healthcare through the Affordable Care Act (Obamacare), you're in a unique position. With your business structured correctly (LLC/S-corp), you can decide on what your salary should be and then examine how that salary will affect your healthcare costs. Keep reading for a dreadfully boring or financially exhilarating journey (depending on how you look at it!)

So, What is an S-Corp anyway?

An S-Corp is a type of corporation that you create for holding the money your business makes. It's like a piggy bank that doesn't get taxes taken out UNTIL you withdraw your salary from it. The money in your S-Corp IS NOT personal income, but the money you take out for your salary is. For the purposes of calculating your personal income, you only need report what you take out of the S-Corp, not what goes in.

Example: You make $5500 from a branding job. This money goes into the S-Corp's bank account and stays there untaxed. When you pay yourself $1500 for your salary that month, then taxes are taken out. The $1500 is what counts toward your healthcare-reportable income.

The beauty of this is that you can make money on the business level (and save it in case you don't work for a while/need medical leave/hit hard times/ etc.), and only take out what you actually need every month for personal costs. Then you can report only that personal amount as Obamacare income. This helps you immensely when it comes to getting help with healthcare costs.

**If you make a lot of money in your business, you'll need to make sure you're not left with a lot of profit at the end of the year that would count towards your personal income. I'm assuming that the readership of my blog might have a little leftover each month, enough to cover the following month or regular business expenses, etc. If you do really well, though, this is a subject for an accountant to cover in depth with you!**

Obamacare Brackets

Obamacare subsidies (financial help) are based on several brackets which vary by state. However, for the most part if you make (these numbers are for a family of three, you can enter your household info in the calculator here) :

Below $20,000 - You may qualify for Medicaid

$20,000 - $50,000 - You'll qualify for a health plan with lower monthly premiums PLUS extra savings.

$50,000 - $80,000 - You'll qualify for a health plan with lower monthly premiums

Above $80,000 - You won't qualify to save on a health insurance plan. But do you really need help if you're making this much $$?

The sweet spot for a family like us is between $20,000 - $50,000, where you can get a lower cost plan with extra discounts on copays (amount you pay for a doctor visit) and sometimes lower deductibles (amount you have to spend before your plan covers the rest)

So here's the big question: Can your family's life fit between $20,000 and $50,000 for three people? Next step: discover your budget.

Budgeting

A few years ago we had a bad year and we didn't make much money. I had to scramble to afford our basic lifestyle and making a budget really helped me. Once we started doing better again I realized that we didn't need to spend ALL our money (genius, huh?) and in fact we could live below our means. This is very empowering. It removes a lot of stress about money and leaves plenty for a rainy day.

Do you know how much you need to live each month? Lots of people don't, so let's get to the how-to on budgeting.

List out what each category costs you (and add categories if you need to!) 
I've filled in some sample amounts: 

Bare Minimum Personal Budget

  • Mortgage payment (including taxes and insurance): $1300
  • Utilities: $400
  • Car insurance: $125
  • Gas: $100
  • Groceries: $400 (Try Aldi!)
  • Dining out: $400
  • Health insurance: $300
  • Miscellaneous costs: $250-500

TOTAL: $3275

add in 15% for taxes, and you've got: $3766 per month

THEN, since what you pay for healthcare is deductible, remove that $300 (or whatever your cost will be) and your final amount is:

FINAL TOTAL: $3466 per month or $41,595 per year

Be brave and start with the bare minimum budget you can, then you can always adjust month-to-month. Need a repair on your house one month? No problem, take an extra $1000 in income that month. How about a special occasion or a vacation? Again, take it if you want to or need to! The beauty of this is that at the end of the year, those relatively small amounts won't increase your overall income by very much. And even if they do, worst case scenario you pay back a bit of the tax-credit subsidy you got for your healthcare.

 

    A side note: You might be wondering where things like cell phone costs are in this budget. I like to charge my cell bill to my business pre-tax along with other things like donations to charity and some meals, etc. You can even do a SEP IRA for part of your retirement plan and take it right out of your business account. Oh, the perks of having a business account. But that's a topic for another time :)

    The Big Save

    Can you live on less? We've decided against paying for a new car, child care, and most entertainment partly because we want to live below our means and also get to pay less for healthcare. Extreme? Maybe so, but it REALLY pays off because at a certain threshold for SILVER PLANS ONLY there's a cost break AND a thing called "cost sharing" which greatly reduces your deductible and your copays. Take a look at these samples:

    If your family of 3 makes $80,000, here's what the Blue Cross plan that we chose looks like:

    If that same family makes $45,000, look at the vast improvement in the same plan:

    And if you  manage to squeeze in at $40,000, look at how the numbers ROCK!: Check out that $0 deductible!

    So, to recap, if you're a small business owner, you can use the S-Corp set up to decide what your minimum salary can be, pay yourself that, and reap the rewards of a low-cost health plan.

    What if I make too much for a Subsidy?

    If you make too much for a subsidy, you probably have to look at your costs and decide if anything can be cut so you can "make less." Remember that "making less" on the personal level leaves more in your business account, and you can always adjust your budget and take more out if you need it. If you can't cut anything, then here's some factors to consider when picking a plan full-cost or otherwise:

    Picking a Plan

    This is my philosophy, so take it or leave it, but here's how I pick a plan: 

    If you have savings

    Go for a plan with a higher out-of-pocket maximum and deductible which usually has a lower monthly payment. You can hedge your bets, hope that you don't get expensively sick/injured, and come out ahead with less spent per month.

    If you don't have savings

    The point of insurance of any sort is to limit risk. If you're sitting out there with no savings, then it makes sense to get a plan with lower out-of-pocket maximum and deductible, but you'll have to cover that risk with a higher monthly payment.

    If you know you'll be using a lot of healthcare (sickness/pregnancy/etc.)

    Get a plan with the best coverage you can afford! That means a low out-of-pocket maximum, a low deductible, and a higher monthly payment.

    If you are young and healthy

    Don't assume that you're invincible. This scenario often pairs well with "very little savings" and "risky activity" so while you'd be likely not to get sick, you're just as likely as anyone else to get injured. The thing you want to guard against at this point in your youth is medical debt. So, you can get a bronze plan or a "catastrophic" plan which has a low monthly payment but a high out-of-pocket maximum and deductible.

    In Conclusion...

    Wow! You made it this far into the article? Pretty exciting stuff, right? You can now inch back from the edge of your seat and return to using the whole thing. 

    Being pregnant during the Zika Virus

    When I found out that I was pregnant back in March, Peter and I were already hearing that we should delay conceiving because of the Zika threat. Too late! This baby is calling the shots, and he seems pretty set on being born in 2017.  

    I had been teaching at UArts up here in Philadelphia, and we were running our Airbnb business through our Philly house while staying with family outside of Allentown. It was all a bit of a mess trying to shuffle everyone around to accommodate my teaching schedule, and I was looking forward to simpler times when we could settle back in Florida. That was the plan.

    Once I was pregnant, though, things changed. We decided that since we're lucky enough to have the option to stay in Pennsylvania through the summer, we should take the opportunity and wait out any chance of getting Zika. Surely by the end of summer things would be resolved. The "mosquito season" would be over and we could spend fall in Florida. Unfortunately the OBGYN's we spoke to don't accept pregnant mothers as new patients when they're in later terms of their pregnancy. What was initially a plan of waiting out the summer became a committed plan to stay in PA throughout the entire pregnancy.

    At first our plan was based on the abstract threat of the disease becoming mosquito born in the U.S. As a native of Florida it seemed as inevitable as a hurricane. It looks like the threat of contracting this potentially harmful or fatal (to the fetus) virus is very real. We're planning to return to Florida after the baby's birth and I'm aware of just how lucky we are to have the choice to stay away. 

    It's kind of shocking how many people told me early on not to worry, to go back to Florida and simply rely on DEET laden mosquito repellent. I figure most of these people must not have lived through the summer in the south. Mosquitos get into the house easily, they're everywhere. You can't even take the trash outside without getting bitten. As the news changes daily about the development of Zika in Miami/Dade there's also stories of successful early trials of a vaccine. Hopefully the severity of this disease lessens soon, but until then the lil' nugget gets a kick out of when I eat soft pretzels and "wooder ice".

    Plagiarism: What to do

    So you've found a villan. Someone out there online is claiming your work as their own. Maybe even selling it!  The anger wells up in you and your first impulse is to dismantle this thief all over the internet. Please don't!  Take a breath and think it out.

    The phrase "cease and desist" gets thrown around a lot but let's get real. Lawyers and lawsuits cost money (a quick search says between $100-300 for starters). Plus, seeking legal action can get slippery because you can then be sued in return. Is it worth it? What happens when the plagiarist lives in another country? Righting this wrong isn't always easy and there's no guarantee that you'll even get satisfaction.

    The Small Fish:

    Most people who plagiarize artwork don't even realize they're doing it. I like to take this approach when I find that someone has used our work on their Etsy t-shirt shop/small business logo, etc. A polite email explaining that the image is our original artwork usually does the job. If it doesn't, then further action might be required. In the age of social media shaming, calling the offender out online is one of the last things I'd recommend doing. It can be a last resort, but remember that people's careers and lives can be destroyed. Make sure the punishment fits the crime. Read these cautionary tales before uncorking a genie that can't be put back in its bottle.

    The Big Fish: 

    Our standard approach when dealing with a "bigger fish" (domestic or foreign) is to try and turn the situation into an opportunity. We contact these businesses and say "Hey, obviously you like our work. Why don't you pay us to make something new for you? Can we develop a fruitful long term relationship?" Since most people don't like to admit they've done something wrong, it's almost human nature, we've found that it's best to sidestep a confrontation. Rather than fighting to be right, leverage a way to make more money together. Turn it into the famous win/win. 

    The Annoying Fish:

    These examples don't really cover all of the plagiarist experiences we've encountered. Some fall in-between and they're probably the most frustrating. There is at least one guy that, despite being contacted numerous times, continues to sell our repurposed artwork. For years. We've gone so far as to contact the different vendors that he's used to sell prints and asked them to take his artwork down. Some comply, others don't. So, in the end, we try to live with it and let go. Some fish are small but annoying.

    Ultimately, your art is driven by ideas and design and illustration are very public mediums. People can connect with it and deep down that's what you hope for as a creator. In this age your work can not only reach people but be distilled from an idea to a meme. Not because it's shallow, but because it's so easy to proliferate. I do think "ownership" of your own work is important, it just takes on a different value when it enters the world. Be fearless when it comes to creating and sharing your artwork, but be savvy when someone infringes. Make relationships whenever possible because being a creative is a business. 

    So, breath in, breath out, and make some money :)