You’ve ditched corporate America and determined to be your personal boss. Congratulations! You’re section of a developing of self-employed workers. Our picked out list of Health Insurance Options For Self Employed will help you do better.
According to the Internal Revenue Service, a person who’s in business for him/herself and who contracts his/her services out to other businesses is considered self-employed. You might also hear a self-employed person referred to as a freelancer or independent contractor.
Roughly 9.6 million workers in the United States are self-employed reports the Bureau of Labor Statistics, the government agency that tracks such things. And the numbers are only expected to go up, with an estimated 103 million Americans counting themselves as self-employed by 2026. That’s a 7.9 percent increase.
Self-employment means that company perks, such as health insurance, aren’t supplied by an employer. Choosing the best alternative insurance source can get a bit complicated.
Do You Really Need Health Insurance?
In a word, yes. While you may be healthy, insurance coverage is crucial for self-employed business owners, especially since you may not have enough savings to cover an illness or accident that leaves you unable to work (or pay the bills). Unless you qualify for an exemption under the Affordable Care Act (ACA), you’ll also pay a penalty if you don’t have health insurance for at least 9 months of the year. This penalty amounts to 2.5 percent of your adjusted gross income, which would likely overshadow the costs of insurance premiums, not to mention the risk of expensive medical bills.
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What are the best Health Insurance Options For Self Employed?
The benefits and perks you may have enjoyed with a company job are not provided to you in a package deal when you’re self-employed. You and your family members will have to fend for yourselves to find health insurance. Consider the following options when deciding what healthcare coverage is best for you:
Common health insurance options
1: State or federal marketplace: You may be eligible to enroll in an insurance plan through the Health Insurance Marketplace (also called the Affordable Care Act or Obamacare) if you’re an independent contractor, consultant, freelancer, or other type of independent worker. There are several categories of health insurance coverage to choose from, some with plans containing low premiums. Open enrollment is Nov. 1 through Dec. 15; however, you can get insurance outside those dates if you have a special circumstance—for example, you lost your job. You can visit www.healthcare.gov to learn more about your options through the federal marketplace.
2: Medicaid: Millions of Americans are provided with low-cost or free coverage through Medicaid. You can be self-employed and be eligible for Medicaid if your household falls below a certain income level (that varies somewhat by state, though the federal government sets minimum standards), and if you meet certain other eligibility criteria. There is no open enrollment period for Medicaid, so you can apply at any time. Visit your local or state department of social services to learn more about coverage under Medicaid, and to see whether you are eligible.
3: Medicare: If you are 65 and older, you may be eligible for Medicare benefits. You also may meet criteria for Medicare if you have been on Social Security Disability (SSD) for two years, or if you have ALS (Lou Gehrig’s Disease) or have End State Renal Disease (ESRD).
4: Employer plan through a family member: If your spouse or partner is employed, check out what it may cost to get on that company’s health insurance plan. Even if you’re not legally married, you may qualify. Some employers offer what’s called domestic partnership health coverage to those in a domestic partnership. If you and your partner (including same-sex couples) share a home and live a domestic life together, you may be eligible, as long as neither of you are married to anyone else. Be aware, though, that if your partner’s employer does pay part of your health insurance premium, you may have to pay taxes on it. In addition, some companies are eliminating this kind of coverage. You’ll have the most success if your partner works for a large company. According to the International Foundation of Employee Benefit Plans, over 75% of companies with 10,000 or more employees are likely to continue to offer healthcare benefits to same- and opposite-sex domestic partners.
Additionally, if you are under 26, you could be covered under your parents’ health insurance plan according to the Affordable Care Act.
5: Private insurance: You can also choose an individual health insurance plan through a private insurance company. You may, however, pay higher monthly premiums than if you had a group plan. Insurance offered through the Affordable Care Act, for example, will usually be much more cost efficient than private health insurance, while providing similar benefits. If you have an insurance policy with a higher deductible, consider opening a health savings account (HSA), where you can deposit money, tax free, to be used for medical expenses.
6: Association health plans: If you’re a self-employed worker who also has a small number of employees, look into an association health plan. Some associations (such as The Writers Guild of America West and The Freelancers Union) offer members healthcare plans at group rates. The associations get these more affordable group rates because they band with others in the same trade or industry to form large groups. But there are downsides. Some of the associations require you to show tax returns and other paperwork to prove you earn a certain amount (that they determine) as a self-employed worker. You may also have to pay membership dues. Some association health plans may not provide as comprehensive coverage as other plans, and there have been concerns about solvency of certain association health plans, leaving them unable to pay their members’ claims. In 2018, the Trump administration introduced measures allowing more people access to AHPs (for example, those who are self-employed and don’t have employees), but the reforms were shot down in court and are being appealed. Talk to an insurance broker or check the Department of Labor website for the latest information.
7: Health sharing plans: Health sharing plans are not health insurance. Rather, they’re plans that share health care costs among members of the health sharing group. You pay a premium (based on the plan you pick) that’s deposited into a community fund. When you need medical care, the bill’s paid out of the fund. It’s important to note, though, that many of these plans are faith-based, and certain medical services (such as birth control or abortions) might not be covered. And because they don’t constitute health insurance, these sharing plans are not ACA compliant, and may not cover people with preexisting conditions. Some health sharing plans also have a limit to the amount they may pay out for their members’ claims, which could be problematic for people who develop serious medical problems.
Short-term Health Insurance Options For Self Employed
1: COBRA: The Consolidated Omnibus Budget Reconciliation Act (COBRA) guarantees you the right to temporarily remain under a former employer’s health insurance plan after you leave your job. How long you may stay on varies. For example, if you’re terminated from your job for reasons other than gross misconduct, you may stay on up to 18 months; for other qualifying events, you may stay on up to 36 months. According to the U.S. Department of Labor, there are other eligibility requirements. What’s more, even though the coverage is the same, you’ll have to pay more out-of-pocket for the insurance since your employer is no longer subsidizing any of it.
2: Short-term health plans: Short-term health plans are temporary, year-long, low-premium/high deductible health care plans that, at the discretion of the insurer, can be renewed for up to three years. But they fall short in a lot of areas. First of all, they don’t cover pre-existing conditions. They also don’t cover maternity care, mental health, or prescription drugs. And many of them don’t cap what you might pay in out-of-pocket costs.
Don’t risk not having health insurance because you may end up spending more if you remain uninsured. Health insurance plans for self-employed individuals may vary depending on where you live and your income. Take the time to do your homework and consider the many ways you can save on coverage.