How to get health insurance when you’re self-employed

Photo by Pixabay

Originally Posted On: https://quickbooks.intuit.com/r/healthcare-and-benefits/health-insurance-self-employed/

Getting health insurance when you’re self-employed isn’t always easy. Unlike traditional employees, self-employed workers don’t have an employer to help cover their monthly premiums or negotiate for lower deductibles on their behalf. The most common solution is for self-employed individuals to get coverage through their spouse. But for those who can’t get on a family member’s plan, it can be difficult or costly to attain coverage.

Some self-employed people choose to insure themselves through their small business. But without the cost-sharing benefits of employees, there’s less incentive to do so. Perhaps that’s why 34% of self-employed people have access to health insurance, compared to roughly 84% of traditional employees. That’s according to Gallup’s 2019 Gig Economy and Self-Employment Report.

If you need an individual health insurance plan, here are some options to consider and reasons for getting insured.

There are a few options when it comes to purchasing health insurance for self-employed people. Here are three to consider in your search.

The Affordable Care Act (ACA) established the health insurance marketplace on HealthCare.gov. It’s a good first stop for anyone shopping for health insurance plans and has resources for self-employed workers specifically.

The marketplace organizes insurance plans by metal: bronze, silver, gold, and platinum (the fifth option is the “catastrophic plan”). Bronze plans have low monthly premiums but high deductibles, which can make treatment expensive. Platinum plans cost more each month but have low deductibles, so nearly all other costs are covered. All plans include some free preventive care coverage and other free or reduced-cost services.

One thing to note is that your spouse’s insurance policy may affect your ability to sign up for a plan on the marketplace. If their insurance offers coverage to spouses and dependents, you likely won’t qualify for premium tax credits and other savings on a marketplace plan.

Just because you’re not a traditional employee doesn’t mean you can’t sign up with a traditional insurance provider. Some insurance companies offer affordable health insurance plans for individuals.

To see your options, check out companies like UnitedHealthcare, Blue Cross Blue Shield, Cigna, and Humana. Such companies sometimes offer multiple options, including short-term health insurance and plans that cost less than what the ACA offers.

Short-term plans are especially helpful for anyone who plans to change their employment status in the near future. You can register for short-term health insurance outside the open enrollment period, with some coverage lasting a month or up to six months. Just be sure to read the fine print on any plan you consider, especially the “exclusions and limitations.”

Another option for freelancers, the self-employed, or even the unemployed is to join a membership organization that offers a group plan. The idea is similar to getting insurance through an employer. Instead of everyone sharing the same company, they share the same industry, interest, or another common tie. Like employers, membership organizations can use their many members to negotiate for better coverage and lower premiums and deductibles.

You may find you’re already part of an organization that offers group health insurance. Organizations like AARP, the Freelancers Union, and Writers Guild of America all offer membership health care coverage. In general, unions, guilds, alumni associations, and even your local chamber of commerce are all good places to check.

Before signing up with any organization’s coverage, be sure to compare their offering with what you can get through the ACA. Some membership organization plans are not ACA compliant and may not cover pre-existing conditions.

Yes, health insurance premiums for self-employed workers are 100% tax-deductible. In fact, they have been since 2003. Self-employed persons may also be able to deduct other medical expenses. And, if they have a health savings account (HSA), they may be able to pay for expenses with pre-tax dollars. Finally, self-employed individuals are allowed to reduce their adjusted gross income based on the amount they pay in health insurance premiums.

Not having health insurance coverage has a few consequences. Most obvious is that you’ll be accountable for all your health care costs if you are injured or ill. You’ll also have to pay out-of-pocket costs for prescription drugs and preventative treatments like flu shots or check-ups.

Many people might remember a fee called the Individual Shared Responsibility Payment. The government imposed this fee at tax time on uninsured individuals. That part of the ACA is no longer active, so there is no federal fee for not having health insurance. However, some states have taken up the practice to incentivize coverage. Check your state’s website or ask your CPA to find out if your state imposes fees for being uninsured.

Before you rule out health insurance on the basis of affordability, consider all your options.

• Medicaid: Typically for low-income individuals, parents, seniors, and disabled persons.
• Medicare: Typically for seniors, disabled persons, and people with end-stage renal disease.
• Subsidized health insurance: For low-income individuals and family members.
• Catastrophic health insurance: For those under 30 years old, with a hardship or affordability exemption.

The most common way to get health insurance in the United States is through an employer as part of their overall health benefits. But while that system works for full-time and many part-time employees, others are left behind. Self-employed persons who own their own business, independent contractors, and freelancers all struggle to find their own insurance.

Fortunately, there are options that can help. And while some may come with higher deductibles or higher premiums, you can’t beat the peace of mind that comes with insurance coverage.