You’re considered self-employed if you own a business, which may or may not have employees. You have multiple options to get health insurance.
One avenue is the Affordable Care Act health insurance marketplace, which offers comprehensive health coverage. You can go to the SHOP Marketplace for small businesses to shop for coverage if you’re self-employed and looking for health insurance.
The ACA marketplace, sometimes referred to as Obamacare, is also the only type of health coverage for which you may be eligible for subsidies and tax credits to help reduce health insurance costs. Eligibility is based on your household income and family size.
To get SHOP tax credits for health insurance for small businesses, you must have fewer than 25 full-time equivalent employees, the average employee salary must be about $56,000 per year or less, you pay at least 50% of your full-time employees’ premium costs and you offer SHOP coverage to all full-timers.
Do Self-Employed People Need Health Insurance?
Just like employees, self-employed people stand to benefit from health insurance coverage. Of course, not paying for insurance can be less expensive in the short term, but uninsured people are just an illness or injury away from catastrophic financial consequences.
Experts recommend comprehensive health insurance for all adults, as paying out of pocket can lead to medical debt. By spending a single night in a hospital, for example, patients without insurance can owe upward of $10,000. What’s more, studies show people without health insurance tend to make important health care decisions based on money and often face poorer health outcomes as a result, particularly when they forgo adequate preventative care.
Who Is Considered Self-Employed?
While a majority of working U.S. adults receive health insurance through their employers, this arrangement may be waning due to rising health care costs. The types of workers who typically seek coverage on their own is also a broad group, including (but not limited to):
- People who work for large companies or groups but aren’t technically employees, such as consultants, doctors, real estate agents and lawyers.
- Independent workers, such as freelance writers, contractor tradespeople (electricians, plumbers, etc.) and sole proprietors of businesses.
- Top Health Insurance Options and Considerations for Self-Employed People.
If you don’t have employer-sponsored insurance (ESI) or access to an employed spouse’s or parent’s plan, consider the options below.
Federal or State Marketplace
In 2010, the federal government’s health insurance marketplace is a central hub for comprehensive insurance for individuals who can’t get an employer plan and for small businesses. While the broader program facilitates shopping and enrollment for private health insurance plans through websites, call centers and in-person help, most people identify it by its main website: HealthCare.gov.
All marketplace plans are “qualified health plans” (QHPs), meaning they must cover medical services the government deems “essential” and can’t place annual or lifetime caps on coverage.
Most states use the federal healthcare.gov site, but some states and Washington, D.C., operate separate platforms. You can access your state’s marketplace site by going to the HealthCare.gov. site and you’ll be directed to the correct state site.
States with their own marketplaces include:
California, Colorado, Connecticut, Idaho, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Pennsylvania, Rhode Island, Vermont, Virginia and Washington.
Open enrollment begins each year on November 1 and lasts until January 15 for most of the country. Some states have slightly different open enrollment periods.
Medicaid
This needs-based assistance program provides free coverage for about 83 million Americans and can be a solid insurance option for self-employed workers who qualify. Participation is based largely on income.
In most states, Medicaid is available to those living below 138% of the federal poverty level—though disability and children are factors as well. Anyone can explore eligibility through healthcare.gov, and enrollment is open year-round.
Medicare
Medicare is a federally managed insurance option primarily for U.S. adults ages 65 and older. Beneficiaries usually pay monthly premiums based on their individual plan and tax history, but some costs are offset by taxpayer funding. Like Medicaid, Medicare is a common way for qualifying people to get coverage without an employer. Medicare.gov offers more information on the program’s components and enrollment instructions.
Military Programs
TRICARE is the government’s health care program for military service members and their families. Applicants can find plan options and other resources on TRICARE’s website and can check eligibility through the milConnect website. Veterans can also apply to enroll in VA coverage programs year-round, which can be supplemented by private insurance or federal programs including TRICARE.
Short-Term Medical Plans
Short-term medical plans can be helpful for transitions into self-employment and managing coverage gaps between plans. They offer affordable but less comprehensive coverage. Short-term plans don’t have to offer coverage provided by ACA plans, so you may have trouble finding a short-term health plan that covers prescriptions, mental health and pregnancies, for instance.
These plans work best for healthy people with low risk of experiencing a health-related event. You can typically have a short-term health plan for up to one year with the option to expand coverage for another two years. Not all states allow these plans and others only allow them for shorter periods like three or six months.
The Biden administration has proposed reducing short-term plans to three or four months.
Limited Benefit Plans
Limited benefit plans also offer pared-down coverage at a lower price. These plans don’t cover all essential health benefits, making them best for supplementing existing insurance—especially plans with high deductibles or minimal coverage.
This category includes critical illness insurance or accident plans, which cover a predetermined list of health issues, and indemnity plans, which pass on costs more to the patient.
Catastrophic Health Insurance
Catastrophic health insurance offers affordable, comprehensive coverage for people under 30 and those facing severe economic hardship, such as homelessness.
These plans, which you can get through the Affordable Care Act marketplace, offer benefits found in standard health insurance. Besides having limited eligibility, catastrophic health plans have high deductibles and out-of-pocket costs. The annual deductible for a catastrophic health insurance plan is $9,450 for individual coverage, which means you would have to pay that amount for healthcare services in a year before the plan picks up the costs.
Once you reach the plan’s health insurance deductible, the health plan picks up the rest of the out-of-pocket costs for the year when you receive healthcare services. Catastrophic plans don’t have coinsurance, which makes it different from most health plans.
Membership Organizations
Professional or trade organizations like unions and guilds often provide group health insurance plans for members, which can be an effective low-cost option for independent workers. Membership organizations like AARP also offer access to specific plans, as do many colleges and universities for students. Group health plan access through an organization tends to function very similarly to many employer-based plans.
Talking to an Agent or Broker
Agents and brokers can be helpful resources and can direct individuals to the best-fitting option from a particular provider. Insurance companies hire or rely on independent agents to sell plans while brokers assist clients with navigating the market. Both tend to operate on commissions from the insurance companies whose product they sell. This Find Local Help tool from healthcare.gov can help you locate agents, brokers and “navigators” (Marketplace-funded assistors) in your area.
Direct Enrollment and Private Exchanges
It’s possible, though not always recommended, to get health insurance directly from an insurance company or from a private online exchange. These types of “direct enrollment sites” were only recently made legal, allowing insurance companies and brokers in many states to enroll customers via private websites. These services tout ease and simplicity in finding a plan, but their benefit to self-employed people is less clear than the benefit to people with ESI. What’s more, private exchanges don’t display all options that might exist on the Marketplace, and the plans don’t have to be ACA-compliant. Their recommendations may also be influenced by commission rates for those making the sales.
COBRA
The Consolidated Omnibus Budget Reconciliation Act, or COBRA, allows workers and their families to stay on an employer-sponsored group plan for up to 18 months after it would have otherwise been terminated. COBRA health insurance is expensive but can help in certain situations—including transitioning from a job with employer benefits to self-employment. To qualify, the previous plan must already be covered under the COBRA law and the employee must have a change in eligibility that meets certain criteria, such as the death, divorce or job loss of the employee.
Health Care Sharing Ministries (HCSMs)
HCSMs purport to help cover health care costs for members of a faith-based organization who lack ESI. These services aren’t actually insurance and have significant limitations. Paying in doesn’t guarantee coverage, and HCSMs aren’t obligated to cover essential benefits or people with preexisting conditions. Many plans also require adherence to certain “lifestyle requirements” to participate, such as abstaining from alcohol, tobacco or other activities deemed “high risk.”
How Much Does Health Insurance Cost for Self-Employed People?
The average cost for a silver ACA health plan for a 30-year-old is $453 a month, $509 a month for a 40-year-old, $712 a month for a 50-year-old and $1,079 a month for a 60 year-old. ACA plans base rates on your age, the plan type, the metal tier (bronze, silver, gold or platinum) and your smoking status. Your household income and family size can also play a role in costs for an ACA plan.
The cost of health insurance can be daunting and hard to predict, especially for the self-employed. A plan’s main costs include its premium (the monthly charge for coverage) and its deductible (how much a patient covers before insurance kicks in). When one is high, the other tends to be low.
Self-employed workers can treat health insurance as a business expense and deduct premiums from adjusted gross income, reducing tax bills or increasing their refund. Many U.S. adults also qualify for discounts on Marketplace options and can use this healthcare.gov calculator to gauge eligibility. Meanwhile, healthcare.gov’s Plans &; Prices tool provides estimates based on one’s income for the costs of different insurance options.
Tips for Self-Employed People to Find Better Health Insurance Coverage
The best policy is one that strikes a balance among premiums, deductibles and coverage that makes sense for the individual. When searching for such a plan, self-employed people should:
- Look for an insurer with a large provider network and a customer-friendly claims process.
- Research Marketplace options before considering a broker or a private exchange.
- Consider joining an organization that offers group plans.
- See if they qualify for premium tax credits and cost sharing reductions, which can make a huge difference in affordability, and for programs like Medicaid and the Children’s Health Insurance Program (CHIP).
- Check their eligibility for a special enrollment period (based on qualifying events) or for year-round enrollment (based on income) rather than waiting until November 1.
Treat insurance as an investment in financial well-being—not just health. While the vast majority of uninsured U.S. adults cite high costs as the main reason for lacking coverage, out-of-pocket medical bills are the leading cause of American consumer bankruptcy.
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