The dream of climbing the corporate ladder is becoming a thing of the past. In fact, with the rise of the millennial workforce, the number of self-employed professionals could triple by 2020. According to a recent FreshBooks survey, we may see the self-employed workforce reach 42 million professionals in the next few years.
While self-employment offers a lot of freedom and flexibility, it also requires the responsibility of planning your retirement and finding your own health care. Without the security of corporate employment, self-employed individuals have to find alternative health care options to protect their interests and the families they support.
If you’re foregoing the traditional workforce, here are a few health care options when you’re self-employed.
Federal and State Health Insurance Marketplace
The Health Insurance Marketplace is a great health care option when you’re self-employed. You are eligible to enroll in the Health Insurance Marketplace if you’re an independent contractor, freelancer, contractor or another type of independent worker who doesn’t have any employees.
Upon visiting HealthCare.gov, you’ll complete a list of questions to confirm your eligibility. Once your application receives approval, there are several categories of plans with low premiums you can choose from. Keep in mind, your savings rate will depend on your expected net income for the year you’re requesting coverage. Here are two plan options you may consider under Health Insurance Marketplace:
- Higher deductible plans with lower premiums: High-deductible plans may be one of the most affordable options when it comes to monthly cost. While you pay a higher deductible, your premium payment will be lower. This plan is beneficial for those who are in good health and don’t anticipate future trauma or accidents. You must apply within the open-enrollment period in order to select one of these plans. If you apply outside the open-enrollment timeframe, you will have to select a short-term health care plan.
- Medicaid: Many Americans receive low-cost or free health care coverage through Medicaid. This type of health care provides coverage for people who have a low income, qualify for disability or are over the age of 65. While you may not qualify for Medicaid based on your income alone, some states may accept your applications. There’s no enrollment period for Medicaid. You can apply at your convenience.
Insurance Companies or Online Sellers
If you don’t qualify for a low-cost health care plan through Marketplace, you can go directly to various insurance companies to review their plan offerings. Most insurers will allow you to compare all of their plan offerings to find the best plan for your needs.
You can also apply for health insurance through an online seller. These online platforms provide insurance plans through a number of insurance companies. They let you compare prices and features prior to enrolling with a plan. Keep in mind, this option may be more expensive depending on your health care needs.
Short-Term Health Insurance
Short-term health insurance plans provide coverage for a specific amount of time. Generally, coverage is offered up to 12 months, depending on the state. There are two major benefits to purchasing a short-term health insurance plan: You can visit a doctor or hospital of your choice and there’s no enrollment period. However, if you have a pre-existing health condition, there’s a chance you’ll be denied coverage.
You may be eligible to renew these plans up to 36 months, depending on the state you reside in.
The Consolidated Omnibus Budget Reconciliation Act (COBRA)
Upon leaving your employer, you may be eligible to extend your current health care plan. Under the Consolidated Omnibus Budget Reconciliation Act, you’re guaranteed a temporary extension to your health care coverage after leaving your job. You’ll be responsible for paying your monthly health care premiums since you’re no longer employed.
It’s important to note that if your previous employer paid a substantial portion of your health care premium prior to your resignation, you’re now responsible for the total premium amount. Meaning, COBRA may be a more expensive health care option when you’re self-employed. However, if you’re in a pinch, it’s good to know you can maintain your current policy until you find another more economical alternative.
You should receive your COBRA letter shortly after you leave your job. This letter will provide a detailed outline of what to expect if you choose to extend your coverage past employment.
Special Interest Groups
There are several associations that cater to the health care needs of the self-employed community. Here are some interest groups you may want to consider:
- The National Association for Self-Employed (NASE) offers day-to-day support for professionals who don’t have access to experts or employment benefits. It also offers other options that have traditionally only been available for large corporations. By paying a monthly or annual membership fee, you’ll gain access to top-tier insurance plans that may fit your health care needs and budget. The NASE offers health, dental, life, critical illness and many other types of insurance coverage. Be sure to read the fine print of all the plan offerings to ensure you understand what you’re signing up for.
- The Freelancers Union is a free online resource for the self-employed. Through this online platform, you can purchase health care coverage while supporting advocacy for freelancers.
- The National Association of Health Underwriters (NAHU) offers discounts on products and services to enhance the success of their business, including insurance, technology and compliance savings. If you’re a NAHU member you can apply for coverage through this association.
Important Factors to Consider When Selecting Health Care
With so many health care options available for the self-employed, it’s important you understand the following information that’ll assist in narrowing down your selections:
- Partnering with a broker or agent: Working with an insurance broker or agent can be a great solution for understanding all of your health care options. If you have no idea where to start, the Health Insurance Marketplace can connect you with brokers or agents to assist you with the health care purchasing process. They may also be able to answer any questions you have as they relate to your health coverage needs. It may be wise to talk to several brokers or agents to determine the best policy available.
- Support you qualify for: Depending on your income level, you may qualify for health insurance at a reduced rate. It’s helpful to know what you’re eligible for before applying for coverage.
- Income level: Your premium amounts may depend on your income level. If your income varies from year to year, you may have to budget for additional health care coverage costs.
- The community you live in: Where you live plays a big role in the amount you will pay for health care. Federal, state and local rules and cost of living play a large part in your premium amount.
- Price of the plan: Going broke in order to pay for health care is not ideal, however, it’s something you should keep your eye on. You don’t want to skimp on health insurance in order to invest in your business. Purchase a policy and get the most you can out of it. You never know when you’ll need your coverage in case of an emergency.
- Length of coverage: Long-term health care plans offer more security than short-term plans. Short-term plans may be cheaper but may not be compliant with the Affordable Care Act.
- Deductible: The higher your deductible, the lower your premium will be. If you have sufficient savings to cover your deductible, selecting a plan with the lowest monthly premium may be a great option.
- Family members: If your spouse has health care coverage, you may want to inquire about coverage under their plan before you search for another option.
The Bottom Line
Opting out of health insurance coverage can result in tax penalties and substantial out-of-pocket expenses if something happens that requires you to seek treatment. That’s why it’s important to research all of your health care options when you’re self-employed to discover the right policy for your needs.
If you’re self-employed, what tips do you have for finding coverage? We want to hear from you. Please leave your answer in the comments below.
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