When I finally made the leap from the corporate world to self-employment, I had all the feels. I was excited for my journey ahead, but I was also nervous about all the things I would need to figure out … like how to get my own health insurance plan.
After many weeks of researching health insurance options, I finally enrolled myself in a healthcare plan. And over the last three years of being self-employed, I’ve learned more than a few things.
If you’re trying to navigate the world of health insurance as a self-employed individual, I’m here to help you make sense of it all.
Why is health insurance different when you’re self-employed?
Getting health insurance when you’re self-employed is different from getting insurance through a traditional employer.
If you’ve ever worked a regular part-time or full-time job, you were probably offered health insurance as an employee benefit.
Your employer contracts with an insurance provider and offers you a few different plans. The company subsidizes a significant portion of your premium, and the rest gets taken out of your paycheck.
But when you’re self-employed, there’s no employer offering to pay for most of your health insurance premium. There’s also no HR department to explain what plans you can pick from and what the plans cover. It’s all on you to get coverage and pay for it.
On top of that, health coverage for self-employed workers is more expensive because you pay 100% of the premium.
Fortunately, self-employed health insurance premiums are tax-deductible. That can seriously help lower your taxable income and the amount of money you owe the IRS in April.
Where to get self-employed health insurance
If you’re new to self-employment and are shopping for health insurance for the first time, I have good news for you — there are lots of ways to get coverage.
Some options are cheaper than others, and you might not qualify for each one. However, it’s worth doing some research to determine which option is right for you.
Below are some of the most common ways self-employed workers can get health insurance.
Thanks to the Affordable Care Act (ACA), self-employed individuals can get health insurance through the government.
The Health Insurance Marketplace, which you can access through HealthCare.gov, is a government-sponsored website that allows you to shop, compare, and purchase health care plans. It’s one of the most common ways self-employed people get health insurance.
To purchase coverage through the Health Insurance Marketplace, you’ll need to input your location and share information about yourself and your income. Some states use their own Health Insurance Marketplace website, whereas others rely on the federal Marketplace website to sell coverage.
Once your virtual application has been submitted, you’ll get matched with plans from participating providers, like Blue Shield or Aetna. You can filter the results by plan type, plan tier, insurance company, premium cost, and out-of-pocket costs, and compare plans side-by-side.
Read more: How to pick a health insurance plan
One of the biggest benefits of using the Marketplace is that you might qualify for subsidies based on your income. These tax credits can help you get a lower premium or lower out-of-pocket costs, depending on the plan you pick.
In order to get Marketplace health insurance, you need to time it right. You can only get coverage during the annual Open Enrollment period or within 60 days of a Qualifying Life Event that allows you to get coverage through a Special Enrollment Period.
Open Enrollment versus Special Enrollment Period
The Health Insurance Marketplace Open Enrollment period occurs every year between November 1st and January 15th. You’re allowed to enroll in a new Marketplace plan or switch to a different plan during this time frame.
If you miss Open Enrollment, you have to wait to get coverage until the following year, unless you are eligible for a Special Enrollment Period.
A Special Enrollment Period allows you to get a Marketplace health insurance plan within 60 days of a Qualifying Life Event. Some examples of Qualifying Life Events include:
- Losing coverage through a job
- Giving birth or adopting
- Moving to a new state
- Getting divorced
Medicaid is a government-sponsored public health insurance program for low-income individuals and families. It can be a good option if you are newly self-employed and aren’t making much money yet.
You can purchase Medicaid coverage at any point, and you don’t need to wait for Open Enrollment. However, there are requirements to enroll, and each state has its own unique criteria.
To determine if you qualify for Medicaid, you can visit the HealthCare.gov website and select your state from the dropdown menu. From there, you can access specific information about Medicaid eligibility and enrollment in your state.
Private health insurance plan
If the Health Insurance Marketplace isn’t the right choice for you, consider getting private health insurance.
Some insurance companies specifically provide plans geared toward self-employed workers with robust coverage and good benefits.
The biggest downside to private health insurance is that the plans tend to be very expensive. And unlike Marketplace plans, you can’t qualify for a tax credit if you are low-income.
To get private health insurance, you have two options. You can shop around yourself to find providers that will insure you, or you can recruit the help of an independent insurance broker.
Most insurance brokers are licensed to sell on-exchange plans (i.e., Marketplace plans) and off-exchange plans (i.e., private plans). With more plans to choose from, you could find a plan with better coverage for your needs or a lower rate.
Using a broker to shop for private health insurance doesn’t cost anything until you purchase coverage. And if you’re busy getting your new business off the ground, working with a broker means you don’t have to spend hours researching different companies and comparing plans.
Online insurance marketplace
Online insurance marketplaces have become a popular way to get health care if you work for yourself. These platforms make it easy to compare plans and providers with a single application.
In addition, using an online marketplace may help you find a more affordable plan, especially if you don’t qualify for a tax credit through Healthcare.gov.
To get health coverage through an online marketplace, you’ll need to input some basic information, like your age, location, tobacco use, household income, and dependents (if you want to insure your spouse or child). Based on your answers, you’ll get matched with multiple providers that sell coverage in your area. It’s easy to see which company can offer you the lowest rate for the type of health plan you want.
Another reason we like online health insurance marketplaces is that it’s easy to consult with experts if you have questions. Many websites, like Policygenius, have a live chat feature and agents on stand-by who can quickly help you during the process if you get stuck.
Your parents, spouse, or partner
I remember the days when I got health insurance through my parents and didn’t have to pay a dime. Looking back, I definitely took those days for granted.
With that being said, if you’re under 26, stick with your parent’s health insurance. There’s no need to purchase your own policy yet. Take advantage of it while you can.
As a self-employed worker, you might also be able to get health insurance through your spouse if they have group health insurance from their employer. Most plans allow family members to get added, but the provider may cover a smaller portion of your premium as a non-employee.
Domestic partners often count, too. If you live with your partner but aren’t legally married, you still might be able to get on their group health insurance plan. Just be prepared to prove your status as a couple, like a lease with both your names on it or a joint bank account.
In terms of enrollment, you may need to wait for Open Enrollment before you can officially join a family member’s policy. Or, if you have a Qualifying Life Event, you might be able to get added during a Special Enrollment Period.
Depending on your profession or industry, you can consider getting a health plan through a membership association.
Often, membership to these types of groups gives you access to discounted health insurance plans in exchange for a monthly or annual membership fee. Plus, there may be other attractive perks associated with membership.
Here are some membership associations that provide health insurance or discounted health insurance plans to members:
- Freelancers Union
- Writers Guild of America West
- National Association for the Self-Employed (NASE)
- National Small Business United (NSBU)
- Graphic Artists Guild
- Affiliated Workers Association (AWA)
If you are considering health coverage through a membership organization, keep in mind that the selection of carriers and plans may be limited. It’s worth looking into if there is a group you can join, but make sure to research other options.
Are you testing the waters of self-employment? Maybe you’re working on a side hustle between full-time jobs. If you don’t plan on becoming fully self-employed for the foreseeable future, temporary health insurance might be what you need.
For a short-term option, look into COBRA (short for Consolidated Omnibus Budget Reconciliation Act), which lets you keep your employer-sponsored plan for 18–36 months after leaving a full-time job.
You get to keep the same plan, but the cost of your premium will increase (probably by a lot) because your employer stops paying their portion of the cost.
Also, it’s important to note that you don’t automatically get enrolled in COBRA when you leave your job. In most cases, you have 60 days to opt-in after your final day of employment.
What if I can’t afford health insurance when I’m self-employed?
Being self-employed can be incredibly lucrative. After all, there are no salary caps like in a 9-5 job. But the truth is, the cost of health coverage for self-employed individuals can be pretty high.
So, what happens if you can’t afford coverage?
Well, I’ll start by saying that health insurance is no longer a legal requirement. Being uninsured is never ideal, but you won’t get penalized for not having health insurance.
If you’re running on a tight budget, weigh out the costs of having insurance versus not having it. If you consider yourself to be very healthy and rarely see the doctor, you could end up paying hundreds of dollars per month for a plan and never use your coverage.
On the other hand, if you’re actively managing medical conditions and seeing the doctor more than a few times per year, having health insurance is definitely worth the cost.
But when deciding whether or not health insurance is worth it, it’s not just about how healthy you are. It also depends on how much risk you’re willing to take.
For example, what would happen if you accidentally cut your finger on a kitchen knife and needed stitches? Could you afford the cost of an ER visit?
What about an injury, like an unexpected fall during a ski trip. If you tore your ACL and needed surgery, would you be able to pay for it without going into significant debt?
Those decisions are yours to make, but they are worth considering before you choose to forgo self-employed health insurance to save money.
Other (cheaper) health plans to consider
If you want to get health insurance but are struggling to afford a standard policy, you might consider a few alternatives.
One option is to get a high-deductible health plan (HDHP). An HDHP has low premiums, but it requires a much higher deductible if you need medical treatment. These policies may also have higher out-of-pocket costs in the form of a copayment or coinsurance.
If you get an HDHP, you can also get a health savings account (HSA), which lets you put aside pre-tax money that can be used to pay for qualified medical expenses. You can’t use HSA dollars to pay your premium, but it can help you lower your costs overall. Best of all, if you don’t use the money in your HSA, it just rolls over to the following year.
Being self-employed can feel like the Wild West, especially when it comes to complicated subjects like individual health insurance. Hopefully, I’ve been able to guide you in the right direction and help you figure out where you can get a plan that meets your needs.
When it comes to health insurance, research is critical. Make sure to take some time to look at your options carefully, compare costs, and make a choice that suits your health needs and your budget.
And if there’s one thing I’ve learned as a self-employed small business owner, having health care is valuable (and worth the cost, in my opinion). Even when you’re young and healthy, things can go wrong unexpectedly.
Having health insurance offers peace of mind, and it can save you from a major financial setback in the future. That way, you can continue to invest in your business.
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