Health Insurance Tips for Freelancers and the Self-Employed
One of the greatest concerns for people considering freelance careers is health insurance coverage. Especially if you’ve grown accustomed to working for an employer who provides good coverage, the thought of becoming an independent contractor raises a big question: what are your healthcare options for yourself and your loved ones?
If you think that freelancing means an end to your health insurance and high copays, think again. Getting health insurance as a freelancer is challenging, but it can be done. There are many options for health insurance for freelancers—and at affordable premiums.
Start with the Affordable Care Act
The Affordable Care Act (ACA) was passed in 2010. The law has three goals, but the one most people are probably familiar with is that it made affordable health insurance available to more people.
As part of the Act, insurance exchanges, or marketplaces, were created to help consumers find the most affordable health insurance for them and their families. As a freelancer, you are likely eligible to purchase your health insurance through your state’s insurance exchange.
The ACA requires that every plan accept every applicant regardless of pre-existing conditions, including pregnancy. This means you can no longer be denied coverage because of a medical condition, such as asthma or diabetes, and coverage cannot be suspended as a result of such conditions.
There are 10 required areas that all ACA plans must cover. This includes:
- Outpatient care
- Emergency services
- Pregnancy, maternity, and newborn care
- Mental health and substance abuse treatment (including counseling and psychotherapy)
- Prescription drugs
- Rehabilitative services
- Lab services
- Preventive and wellness checks, including chronic disease management
- Pediatric services which include oral and vision care
Additionally, all ACA plans must offer the following benefits:
- Birth control coverage
- Breastfeeding coverage
In addition to the above minimums, some ACA plans may offer additional benefits such as:
- Dental coverage
- Vision coverage
- Medical management programs(for example, diabetes care)
Understand Your State’s Marketplace
Four levels of insurance are available for purchase at the state marketplaces. These levels range from bronze to platinum, each with monthly premiums that will not exceed a fixed percentage of an individual’s annual income.
While there are many factors to consider when choosing a level of coverage, the lower your premium, the higher your out-of-pocket costs. Below is a breakdown of the percentage you pay on each plan. However, the actual dollar amount you pay will depend on your state’s marketplace.
- Bronze plans (the cheapest): the insurance pays 60%, you pay 40%
- Silver plans: the insurance pays 70%, you pay 30%
- Gold plans: the insurance pays 80%, you pay 20%
- Platinum plans: the insurance pays 90%, you pay 10%
The Individual Mandate
The ACA also introduced an individual mandate that stated that every individual must have health insurance. Sole proprietors and freelancers were required to have health insurance or pay a fine.
The fine started at $95 but was tied to inflation starting in 2016. That meant that as an individual, if you didn’t have health insurance, the penalty in 2016 was either $695 per adult or 2.5% of your income, whichever was greater. And that penalty would rise with inflation over time.
As of 2019, the individual penalty was removed, and you no longer have to pay the fine if you choose to drop your health insurance. However, some states have individual mandates for their residents. So even though you won’t face a federal penalty, you may face a state penalty if you drop your health insurance.
If you’re unsure if you will face a fine in your state for not having insurance as a freelancer, contact a qualified tax professional.
Even if you don’t face a financial penalty for not having health insurance, consider getting it anyway. The smallest medical issues can balloon into a financial crisis, and it’s generally better to have some insurance than none.
Many Americans are worried that ACA plans will cost more than they can afford. To combat this worry, the government offers tax credits to individuals under the age of 65, with an income level between 100% and 400% above the Federal Poverty Line (FPL).
The number of credits you can receive is determined by your income, the number of dependents filed on your tax forms, and your marital status. If you’re curious about potential savings, go to the Kaiser Family Foundation’s Subsidy Calculator to find out where you stand.
The ACA also expanded Medicaid coverage. Medicaid may not seem like an option for you, but if you make less than 138% of the FPL, you may be eligible for the program. However, states were not required to expand their Medicaid coverage, and, therefore, Medicaid may not be an option where you live. To see if your state has expanded Medicaid, check out this interactive map.
Look into COBRA Coverage
If you’re leaving a traditional job to make the leap to freelancing, investigate whether you’re eligible for COBRA continuation health coverage through your former employer. Under the law, your employer is required to extend your health benefits at the group rate that the company acquired it. Your length of coverage can last up to 18 months if you were let go or quit.
But this should only be a temporary solution. COBRA premiums can be expensive compared to what you may have been paying as an employee and are likely more than what you might pay for an ACA plan. And, after 18 months, you’ll need your own plan anyway, so why not get a jump on it?
Check out Professional, Business, and Trade Group Coverage
Healthcare coverage through trade associations and professional organizations, such as the Freelancers Union, can be a great option for getting coverage as a freelancer under a group plan. Industry-related groups that offer healthcare plans can include organizations where people share the same professions or hobbies, chambers of commerce, or other business organizations.
Piggy-Back onto Your Spouse’s Plan
If you’re leaving a job where you had employer-provided insurance, but still have coverage under your spouse’s plan, consider joining that plan. However, many employer-sponsored plans impose additional fees for adding spouses. And thanks to those fees, you may be better off on your own plan.
Use an Insurance Agent
Independent health insurance agents can help you narrow down your search to get the coverage you truly need. Brokers are often paid a commission by the insurance company you choose, so that might increase your premium. A hired insurance agent is a good option if you’re seeking personalized attention by someone who can guide you throughout the entire process.
Bonus Tip: Set Up a Health Savings Account
Also known as an HSA, a Health Savings Account is a great option not just for freelancers, but for just about anyone in the workforce who’s looking for a tax-free way to save money to help cover healthcare costs. HSAs were established in 2003 as an option for individuals whose healthcare plans have high deductibles; the money you set aside for these medical expenses can receive tax-preferred treatment under federal guidelines.
Make Freelancing a Little More Certain
Freelancing comes with a lot of uncertainties. But, having a reliable and affordable self-employed healthcare plan helps you plan out your monthly expenses and, equally important, protect you and your family in case something happens.
This past December we hosted a webinar with Assurance that discussed the ACA and short-term health insurance for flexible workers. Watch the webinar recording to learn all about short-term insurance and how it may work for you.
Michael Cahill, Jennifer Parris, and Adrianne Bibby contributed to this article
Photo Credit: bigstockphoto.com
A version of this article was originally published on October 11, 2014.
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Adrianne Bibby, FlexJobs Staff Writer
Adrianne Bibby is a staff writer at FlexJobs, the premier website for telecommuting, flexible schedule, and freelance job postings. Her writing focuses on work-balance issues, finding joy in your job, and using life experience to transition to a more meaningful,…Read More >
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