Health Insurance Guide for Freelancers
Congrats! You’ve broken free of the 9-to-5 and are now officially entering self-employment. While it’s an exciting time, there are many new issues you have to consider, one of them being self-employed health insurance. As a full-time employee, you got the benefit of receiving health insurance through your employer. Now that you’re an independent contractor or freelancer or even an Uber driver, you no longer have that benefit.
Considering you’ll now have to purchase your own self-employed insurance, you’ll probably ask yourself this question:
Do I really need health insurance?
If you’re healthy, young and rarely ever go to the doctor, you probably don’t think you even need it. While that may be the case, the Affordable Care Act requires that all adults have health insurance. Otherwise, you could face a penalty of 2.5% of your income for the year.
(*One caveat – if you are under the age of 26, you may be eligible for coverage under your parent’s’ insurance policy.)
Aside from being required by law, you should in general always have some type of health insurance to protect yourself, even the most basic. Even though you may be healthy, you never know what can happen. And a trip to the hospital without insurance can cost you an arm and a leg (figuratively that is, not literally).
What does ‘self-employed’ mean?
While you may considered yourself self-employed or a freelance worker, it’s important to understand what that term legally means in the eyes of the government.
You are considered self-employed if you have a business or are involved in any business that brings in income but does not have any employees. Self-employment refers to freelancers, independent contractors and consultants. Those who are self-employed typically receive 1099 tax forms.
If your business has at least one other employee (other than yourself), you would not be considered self-employed. You would fall under the small business category and the same rules for health insurance do not apply to you. Generally, an employee is considered anyone who receives a W-2 for tax filing purposes.
For more information on how the IRS classifies self-employment, visit the Self-Employed Individuals Tax Center.
What are my health insurance needs?
Before you begin shopping for health insurance, you should first assess your health insurance needs. There is a very wide variety for health insurance plans you can choose from and a lot of it can get very confusing. You should understand what your needs are so that you don’t end up paying more for coverage you’ll never really need. A healthy 20-something probably doesn’t need the same insurance plan as a 50-something with a medical history.
First, consider these factors:
- Pre-existing conditions – Under the Affordable Care Act, health insurers can no longer limit or deny you coverage due to any pre-existing conditions.
- Your current health – If you have a medical history or generally need to go to the doctor more often, this will affect what plan you should choose. You probably want a plan with a lower deductible to save money. However, you’ll also be paying a highly monthly premium.
- How many people will be covered – the number of dependents covered under your plan will affect how much it will cost you.
- Financial situation – Because of your financial status, you may qualify for savings or subsidized insurance (click here to find out if you qualify)
Where can I get health insurance?
If you are self-employed, the easiest way for you to get health insurance is through the Health Insurance Marketplace. Created under the Affordable Care Act or “Obamacare” (more on that later), the Health Insurance Marketplace is a place where you can learn more about health insurance options, compare plans and costs, and enroll.
In the marketplace, you can shop plans and choose from several different options, from catastrophic plans (low coverage but cheaper in costs) to premium plans (higher coverage but higher costs).
For more information about how the Health Insurance Marketplace can help you, click here to visit their website. There, they also explain how to project your income as a freelancer (which you need to do when enrolling).
Also take a look at this list at On-Demand Society of additional healthcare options for the self-employed and to learn more information about how to enroll.
What is the Affordable Care Act?
The Affordable Care Act, otherwise known as ‘Obamacare’, went into effect in 2014 and greatly changed the landscape of healthcare in the United States. While there has been some controversies with the Act (specially requiring adult to have health insurance), it has generally made it much easier and more affordable for freelancers and independent contractors to obtain health insurance.
A few highlights of the Act include:
- Insurers are not allowed to limit or deny coverage due to pre-existing conditions
- Lifetime limits (dollar limit the insurer spends on the insured) is now banned
- Preventive care is covered 100%
- Ability to choose doctor, within the plan’s network
What plan is right for me?
In the marketplace, you will find that there are 4 plan categories. These categories are based on the percentage the plan pays for medical care. If you choose a higher tier category, your monthly premium will be higher but you will be saving on out-of-pocket costs. As a general rule of thumb, the more you expect to need to see a doctor, the higher the tier you should go for.
The tiers are:
- Bronze (60%)
- Silver (70%)
- Gold (80%)
- Platinum (90%)
There are also catastrophic plans, which are good for those who are generally healthy and never see a doctor but want to be covered in case of emergency.
When can I enroll in an health insurance plan?
To enroll in a plan, you need to apply during the open enrollment period or during a special enrollment period, if you qualify.
Open Enrollment typically runs from November 1st – January 31st each year. At this time, anyone can apply. For the 2016 year, open enrollment for state healthcare exchanges is now open and you can enroll at any time until January 31, 2016.
Outside of the open enrollment period, you may also be eligible for a special enrollment period due to a qualifying event. Qualifying events include:
- Having a baby, adopting a child, or placing a child in foster care.
- Losing other health coverage.
To better understand whether you qualify for a special enrollment period, click here.
Can I just get short-term medical coverage?
For those who are self-employed, your job status may be only be temporary or you may be planning on going back to full-time employment sometime in the future. Therefore, you might be thinking about short-term medical coverage.
Typically, short-term coverage plans cover you anywhere from 30 days to 12 months. They typically only cover specific services and surgery, not routine visits or preventive care. This may be a good option for you if you missed open enrollment and do not qualify for a special enrollment period.
Keep in mind, short-term coverage does not fall under the ACA (Affordable Care Act) and you may be paying higher premiums due to pre-existing conditions. Short-term coverage also does not meet the minimum requirements for health insurance as required by the ACA and therefore, you may be faced with penalties.
Aside from the marketplace, where else can I get health insurance?
Aside from the health insurance marketplace, you have several other options if you are self employed:
- Spouse’s Insurance
- Professional Groups
- Chambers of Commerce
You can also purchase insurance through private companies. For a list of other health insurance options, click here.
To learn more about health insurance for those who are self-employed: visit these resources: