Affordable Health Insurance Tips for the Self Employed
The gig economy is thriving, with more and more workers choosing to leave their careers and go the freelance route. There are plenty of upsides to this decision, the biggest usually being the flexibility and autonomy involved.
However, there are also a few things to consider before handing in your resignation and going rogue. The biggest is: how will you find (affordable) health insurance when you’re self-employed?
Salaried vs Self-Employed
A few years ago, I decided to become a freelance writer and editor full-time. The benefits are wonderful, after all. I make my own schedule and have an incredibly flexible lifestyle–a definite must, considering that I have a special-needs child with his own demands. Plus, if I want to head to the beach for a week (as I’m doing next month), I simply bring my computer along. The freelance life has some excellent benefits.
Unfortunately, there are also some downsides. My biggest hurdle, by far, has been acquiring adequate health insurance.
As a freelancer, my options are pretty limited. I don’t have an employer footing part of the bill for premiums, and my cost isn’t subsidized due to a large group of enrollees at my workplace. My plan doesn’t automatically come with vision or dental coverage, either. All of this is chosen and purchased come open enrollment time, and believe me: it’s not cheap.
For instance: the average annual premium paid by employees (after their employers subsidized a portion of the cost) was a mere $1,478 in Virginia last year. This breaks down to about $123 a month for health insurance coverage for one person–sounds pretty affordable to me! Conversely, let’s take a look at how much I’m paying a month for sub-par coverage that also includes a $7,000 annual deductible and a ridiculously high cost-share: $406 a month.
That’s why for some, health insurance alone might be reason enough to stay in a salaried position. This is especially true if you have children and their other parent/your spouse doesn’t have affordable family coverage for them. Depending on how much the freelance life is worth to you (we’re talking your income as much as your quality of life here), you may even choose to stay in your desk job for a few more years. If so, you can always freelance on the side and earn extra income.
But let’s say that you are absolutely, positively set on being self-employed. What are your best options for finding affordable coverage?
Some employers will offer health benefits to part-time employees. It might be worth asking your company if they would be willing to keep you on the group health insurance plan if you went to part-time status, giving you the best of both worlds.
There are plenty of other companies that offer part-time and freelance employees, too. Depending on who you will be working for as a freelancer, it’s worth asking if there are any health benefits (either in the form of a group plan or a health care reimbursement) available.
If you’re newly-self-employed or haven’t yet jumped ship, COBRA is an option. This temporary health care option offers you the ability to continue your same group coverage after you leave your position, at a rate lower than you’d pay if buying individual coverage elsewhere.
COBRA is available for the 18-month period following your employment change. There are a few caveats that determine whether COBRA is an option, namely that your company has at least 20 employees, so be sure to ask HR if it’s available to you.
COBRA isn’t cheap, though. You’ll be offered the same, or a similar, plan as the one you had previously. However, instead of your employer subsidizing a significant portion of the cost, you’ll usually be left footing the entire bill. This means that you can wind up paying three or four times the premiums you were paying before.
Of course, this is still usually cheaper than buying the same plan on the open market, since you’re still included in the group plan. The difference is that your employer isn’t covering part of the bill for you anymore.
If you are married or will be getting married soon, you might be in luck. If your spouse’s employer offers health insurance coverage, you can buy into the policy along with them. This is usually the cheapest option for the self-employed, and gives you the best of both worlds.
Of course, you’re at the mercy of the plans offered by your spouse’s workplace, which might be lacking compared to your needs/desires. However, if your goal is to get the most affordable coverage possible, buying in with your significant other is ideal.
In some states, this is an option even if you’re not married! You can sometimes jump in on an employer-sponsored health care plan with a domestic partner or common law spouse; just be sure to check your own state’s laws and regulations to see if this is an option.
If you don’t have a spouse’s plan to piggyback on and COBRA isn’t an option for you (or at least, a cost-effective one), it’s time to shop around. This means looking into the Healthcare Marketplace for plans within your state.
The open enrollment period occurs during the last quarter of the year. This is when you can shop around and choose the plan that will best suit you for the following calendar year. If you have recently lost coverage (by resigning from your position or getting fired/laid off), you will typically qualify for a special enrollment period, or SEP.
Qualifying for a SEP means that you can shop around for health insurance through the Marketplace regardless of the month, buying coverage that will last you through the end of the year. Keep in mind, though, that this period is only valid for the 60 days following your loss of coverage. Wait longer than that to apply, and you’re out of luck!
If you are confused about coverage options or the best plan for you, you can utilize the assistance of an assister, agent, or broker. These individuals provide you with healthcare advice and guidance free of charge, helping you find CHIP, Medicaid, or individual purchased plans.
Can’t find what you want in the Marketplace? Then start looking elsewhere online.
Websites like eHealthInsurance.com will offer you quotes and coverage options based on your (and your family’s) unique needs. This kind of aggregator will provide you with quotes from various companies, which you can compare side-by-side until you find what you want. Once you find the right fit, you can even apply easily online.
Go With a Group
Just because you left your workplace doesn’t mean that group options (and therefore, group pricing) are out the window. It all depends on where you live and the organizations you’re a part of.
For instance, The Freelancers Union offers to link you with group health coverage plans that are perfect for the self-employed. They’re not offered in all areas, though, so be sure to check your ZIP code on the site. Organizations like AARP also offer group health plans.
Watch the Specifics
If you’re trying to make your new coverage work with your new income, you probably want to save money wherever you can. That’s where minding the specifics of your plan will come into play.
Your most important factor is probably your premium. This is the actual cost for coverage each month, whether you use the insurance or not. If you want to lower your premium without reducing the quality or level of coverage, your best bet is to raise your deductible.
Your deductible is the amount of money you’ll need to pay out of pocket each calendar year before your insurance company will kick in and foot the bill. This includes cost-shares, depending on the services required, but can easily be in the thousands of dollars.
By raising your deductible, you open the door to cheaper premiums. Just keep in mind that if you break your wrist and have a $7,000 deductible to meet, you’ll be writing a hefty check for care even though you have valid insurance coverage. As with any other type of insurance, be sure that you can actually afford the unexpected expense of a high deductible before you officially raise it.
Some plans offer coverage for frequent office visits at little or no cost, while others will make you pay out of pocket for those appointments. If you have small children who get sick or injured a lot, choose a plan that won’t cost you an arm and a leg in doctor’s visit fees. Conversely, if you very rarely visit the doctor, choose a plan that costs less but provides fewer in-office visits.
Health Savings Plans are a great way to pay for medical expenses with tax-free money as well as save for future expenses. Many employers offer them along with their group health care plans, but the self-employed are usually out of luck.
There are some individual plans that will offer an HSA along with their coverage, but it comes at a cost: you’ll usually only find these with high-deductible health plans with limited care coverage. Or, if you find one with a low-deductible plan, you can expect the inclusion of an HSA to raise the premiums even higher.
Buying health insurance is a difficult process, even if it’s just choosing the right plan offered by your employer. When you decide to be self-employed, though, the process becomes even trickier. Finding coverage that is not only affordable but also meets the needs of you and your family can be tricky.
By shopping around, utilizing resources like brokers and agents, and even shopping for group plans through a part-time employer or organization can all be great ways to snag the right plan for you.