Health Insurance Options for the Self-Employed

The Ins and Outs of Self-Employed Health Insurance

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Being self-employed has many benefits, including making your own schedule and working from home, but one major drawback is having to provide your own health insurance. Workers who are employed by a company generally have access to insurance options provided by the employer, but a self-employed individual must set up their own health insurance.

Though it may seem like a difficult process, arranging such health insurance can be simplified with a little help. Many options exist for self-employed workers with a variety of ways to save. Learn more about finding the right plan, understanding the costs involved, and qualifying for a low premium.

Key Takeaways

  • Self-employed individuals can choose from a variety of insurance options, including traditional health insurance, high-deductible health plans, Medicaid, and other options on the Health Insurance Marketplace.
  • The cost of health insurance for self-employed workers can vary depending on several factors, including location, age, and the coverage included in the plan.
  • Using an online marketplace or contacting an independent broker or agent can open up more options, helping you find the specific coverage you’re looking for within your budget.

Do I Need Self-Employed Health Insurance?

Self-employment covers many types of workers who generate income by providing services but aren’t employed by a company. Self-employed workers who generally need to provide their own health insurance include:

  • Independent contractors
  • Freelancers
  • Entrepreneurs
  • Consultants
  • Gig workers

As of tax year 2019, you no longer need to enroll in a health insurance plan or have an exemption to avoid a penalty on your federal income taxes (known as the shared responsibility payment). However, some states have mandates in place requiring taxpayers without insurance to pay penalties when filing state taxes.

Even if you won’t face penalties, it’s still important to enroll in health insurance. One main reason is to lower medical costs. Without insurance, patients must pay 100% of the cost, which could get expensive. With insurance, some portion of that bill is covered. Having health insurance also provides free preventative services, such as screenings.

Using the Health Insurance Marketplace

Freelancers and other self-employed people should start with the Health Insurance Marketplace by simply visiting HealthCare.gov. The Marketplace offers many options for individual and family private health insurance enrollment and allows users to shop around for the best coverage. It also provides criteria to help determine qualifications for premium tax credits, the Children’s Health Insurance Program (CHIP), and Medicaid.

You can apply online by creating an account on HealthCare.gov. As a freelancer, you’ll need to estimate your self-employment income for the year as accurately as possible, but you can make updates if this changes later on. 

For the application, you’ll also need to provide several details, including your:

  • Basic contact information
  • Health coverage
  • Identity
  • Household size
  • Immigration status
  • Income taxes
  • Employment of members of your household
  • All forms of income

What Plan Is Right for You?

You must consider several things when looking into health insurance plans, such as the type of coverage you prefer, the amount of the premium, and the deductible amount. Maybe you’re looking for a lower premium and something basic that includes just the essentials; for that, you can consider high-deductible health plans. Maybe you prefer a comprehensive plan with a lower deductible to cover medical costs. You can compare these options through a marketplace.

Association health plans are another option for workers in certain industries. To qualify through an association or professional organization, you’ll need to become a member and meet their criteria. You could also apply for Medicaid and find you qualify for free coverage. You may find many options to fit your preferences, so be sure to conduct research when seeking a new health insurance plan.

What Does Self-Employed Health Insurance Cost?

According to a study by eHealth, the nationwide average individual monthly premium in 2020 was $456 for plans compliant with the Affordable Care Act (ACA). The cost of health insurance for self-employed workers can range depending on many factors. Some may qualify for free or low-cost basic medical coverage based on their income levels, while others might opt for comprehensive plans that cost more but provide extra benefits.

The type of coverage you choose and your age can both impact your premium. Rates can also differ by location, as states have different set requirements. The type of enrollment options you choose can also have an impact. For example, a family plan can differ in cost from an individual plan.

Self-employed workers must pay the premium in full unless they qualify for premium tax credits through the Health Insurance Marketplace. But you can claim premium payments as a deduction when you file your taxes. Make sure to look into the self-employed health insurance deduction to see if you qualify.

Understanding Health Insurance Costs

Understanding the different types of health care costs is critical as you conduct your research. 

A deductible is the amount you owe before the insurance coverage is used for expenses. 

The out-of-pocket maximum caps the amount you would need to pay within a specified time. For example, if the out-of-pocket maximum is $1,000, your insurance company would cover all other expenses after you’ve spent $1,000. 

A copayment is usually paid for appointments or other medical services after the deductible is reached.

High-Deductible Health Plans

A high-deductible health plan (HDHP) is a type of health plan that offers lower premiums due to its high-deductible level. This means the out-of-pocket costs are greater than traditional insurance plans. If you are generally healthy, perhaps only needing yearly appointments, this could be a beneficial plan for you.

High-deductible health plans also can be helpful for those who have health savings accounts (HSAs). Keep in mind that while you can use the funds in an HSA at any time to pay for qualified medical expenses, you may only contribute to an HSA if you have a health plan of this type. The two work together to help save on medical costs as the funds in the HSA are tax-free.

Qualifying for Medicaid

Medicaid is a program offering health insurance options for individuals and families who meet the income limits. Freelancers who are just starting off and aren’t generating a lot of income yet may qualify for Medicaid. Self-employed workers who don’t qualify based on income might still qualify based on household factors.

You can apply for Medicaid online using the Health Insurance Marketplace or through the Medicaid agency for your state. You can apply for Medicaid at any time.

Even if you are unsure of what your self-employment income will be, you can apply with an estimated amount of income you expect to make and your premium will be based on this amount. This amount may be adjusted later if your income changes.

Get Expert Advice

Applying directly with insurance companies may not provide a variety of options because you are limited to one company. Consider using an online marketplace to find a plan with the coverage you need that fits within your budget.

If you need assistance selecting a health insurance plan, you might consider contacting an independent agent. They are licensed and can help you compare plans as they offer many options with various insurance carriers.

Frequently Asked Questions

Can you claim health insurance as a deduction if you are self-employed?

Self-employed taxpayers can generally claim health insurance as a deduction on their taxes. Depending on how your business is structured, there are some limitations and different tax forms may be required.

Is there special insurance if I plan on being self-employed only for a short time?

Self-employed workers who only need insurance temporarily can consider short-term health insurance. But finding a plan at HealthCare.gov is probably a better option. Short-term plans typically include basic coverage, and costs vary depending on the insurance company and other factors. Self-employed workers can cancel this insurance at any point but generally incur higher deductibles while paying for it.

What is group insurance?

Group plans are those offered by businesses and organizations to cover the workers they employ as well as their family members. Employers are responsible for selecting and maintaining the insurance plan.