Finding health insurance for self-employed individuals doesn’t have to be difficult. We’ve compiled seven of your different options. Read on to learn about the best type of health insurance for self-employed people and identify which might be the best for you.
One of the most highly frequented questions we get in our DMs is around health insurance. Because many of us are accustomed to the 9 to 5, W-2 work-life, finding health insurance outside of your job may seem difficult. For a long time, it actually may have been difficult to find insurance outside of your workplace.
But with more and more people choosing to be self-employed, our healthcare system and laws have had to catch up. Now, you have several options. Pursuing this path shouldn’t be a headache; read on to learn more about your different medical insurance options as someone who is self-employed.
Be On Your Family’s Health Insurance Plan
There are a few different options here: coverage under your spouse, your domestic (unmarried) partner, or your parents.
For coverage under your spouse, you will have to check with their employer. Many companies offer health plans with coverage available for spouses. A key difference you might find, however, is that the percentage of employer-coverage to your spouse’s insurance plan (i.e. their direct employee) might be higher than coverage for you (i.e. not a company employee). A situation could look like: your spouse’s insurance premium (your monthly cost) covered 100% by the employer, while your coverage is only covered 30% by the employer.
For coverage under your partner, you do not have to be married to this person. The definition of a domestic partner varies by state, but if you live with this person and can (if needed) provide proof, you may be able to qualify. While not as many companies offer coverage for domestic partnerships, it may still be an option.
For coverage under your parents, you have to be 25 or under to qualify. You do not have to live with your parents to still qualify; although if you live in a different state, you may have to pay extra to see doctors out of network.
COBRA (for short-term!)
If you have recently left your full-time, or are in the process of transitioning, COBRA is an option for you. Keep in mind, however, that COBRA is not a permanent solution—it usually provides coverage for up to 18 months. Through this option, you can keep the same insurance plan that your former employer offered.
A big flag: do not expect the premium to be the same as when you were still an employee. Your premium will most likely be higher, as your employer will no longer be contributing to your premium.
Health Insurance Marketplace
Thanks to the Affordable Care Act (ACA), we now have a wider set of more affordable health insurance plans outside of the workplace. Find this marketplace at HealthCare.gov. When you enter your information, you can also see if you qualify for Medicaid, which we will discuss below.
Your plan options will vary by state, as each state has their own marketplace; you will be able to access each through the same site. Note: you will only be able to purchase a plan during the annual open enrollment period. This is usually from November through mid-December, but has been amended for 2021 due to the pandemic. For this year, many states’ enrollment period is through August 15, but you can find your state’s open enrollment period here, as some have deadlines that are further out.
Your plan options under the ACA fall into five tiers, with platinum having the highest premiums (monthly cost) but the lowest deductible (the max amount you will have to pay out of pocket before your insurance starts fully kicking in), and bronze having the lowest premiums but with high deductibles and a lower coverage (i.e. 60% of your healthcare costs vs platinum covering about 90%). Your fifth option is the catastrophic plan, which is only available to people 30 and under and those who have a demonstrated inability to afford one of the other four plans. Premiums are low but deductibles are high under this plan.
Note: if your household income is under a certain threshold, you may qualify for subsidies. These can come in the form of tax credits (i.e. your premium will be lower) or cost-sharing subsidies (i.e. your out-of-pocket costs or co-pays will be lower). You can see if you qualify by visiting the same website, HealthCare.gov.
Plans with a high deductible may even qualify you for a Health Savings Account, which (for many states) offers a triple tax-advantaged investment account!
Using the same site HealthCare.gov, you will be able to determine if you qualify for Medicaid, which is a public health insurance program aimed at low-income individuals.
Medicaid must cover essential benefits like doctor visits, lab work, and hospital care, but other benefits (such as prescriptions) may only be available in some states. Your eligibility will also vary by state, as some states have chosen to expand coverage while others have not.
This option is similar to getting insurance from an employer, only it’s through a membership organization, where members share either the same industry, interest, or any other common affiliation. Some of these organizations offer a group plan, which could potentially mean lower premiums. Organizations that offer insurance include:
- Freelancers Union— this is exactly what it sounds like! A union for freelancers.
- Writers Guild of America— this is a labor union that represents professional writers and producers in different industries. As of July 2021, you need to earn $40,854 in covered earnings to be able to qualify for benefits. Read more about their benefits here.
- Affiliated Workers Association — this is a non-profit consisting of over 7,000 small business owners, self-employed individuals, independent contractors, and entrepreneurs from across the country. Note: this association does not offer full health insurance plans, but rather offers fixed indemnity plans, which cover major medical needs. Read more about their benefits here.
These are only some of the associations out there, but you can also research based on your industry or perhaps even alumni associations of your alma mater.
Cash-Price Health Insurance
Did you know sometimes it might be cheaper to pay for your medical services cash, rather than through your insurance?
That’s where companies like Sidecar Health step in. While there may be other companies like Sidecar, they are a trusted partner of Yo Quiero Dinero.
They’ve sought to make health insurance more affordable through leveraging the discount that offices will sometimes provide when you sidestep the bureaucracy of insurance. Think about it: if you pay cash, you’re making it easier for the office or clinic to get their money. They can avoid all the paperwork and hours spent logging claims, etc.
In the eyes of your medical provider, you are a self-paying patient, even though Sidecar Health will send you your own payment card. Sidecar Health reimburses a fixed rate for your services, based on your zipcode. Your elected coverage then steps in accordingly. It is highly customizable to fit your needs.
Traditional health insurance companies are offering more affordable plans for individuals. For this option, we’ve turned to Investopedia, who has researched the traditional companies out there and have compiled their list of the 6 best health insurance options for self-employed individuals in 2021. Find their list here.
Bonus: Tax Deductions
You may be able to include your health insurance as a tax deduction! This would not be a business deduction (nor towards your self-employment taxes), but rather a special individual deduction.
You can only claim the health insurance premiums write-off for months when neither you nor your spouse were eligible to participate in an employer-subsidized health plan.
For example, if you were single and ineligible for any employer-provided health plan during the last six months of the year because you left your job and started your own business, you can claim the deduction for premiums you paid for coverage during that six-month period.
Your deductions cannot exceed the earned income from your business. Consult a tax professional when navigating this.
Transitioning out of the traditional 9 to 5 may be scary. Let’s not make healthcare one more reason to hold you back.
We’ve presented you with several options for you to choose from. Especially when dealing with things like healthcare, we recommend comparing your various options and getting quotes from multiple providers. For example, while signing up under your family’s plan may sound appealing, perhaps it might be more affordable to seek insurance through your state’s marketplace.
And remember: your healthcare needs today, may not be your healthcare needs two years from now. It is okay to have your needs and eligibility fluctuate.
We hope you end this blog post feeling more confident in your decision to navigate self-employment. For more guidance on health insurance options for the self-employed, check out episode 203 with Lynn Flair!
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