Being self-employed comes with an array of financial challenges that don’t apply to people who are traditionally employed. That includes the necessity of researching and buying your own health insurance coverage.
Many of our Addition Financial members work for themselves, either because they own a business or because they support themselves by freelancing or doing gig work. They sometimes ask us:
"How do you stay covered with health insurance if you own a business or do independent consulting or freelancing?"
We want our members to be knowledgeable about self employed health insurance. With that in mind, we’ve created this post with some basic information about how to get self-employed health insurance plus eight do’s and don’ts to help you understand your options and responsibilities.
If you work for yourself, you should know that there is more than one way to get health insurance. Getting coverage is a big concern for people who are self-employed because plans that you purchase directly are often more expensive than the plan you might get if you were traditionally employed.
The first option, and one that you may need to consider if your income is below a specified threshold, is Medicaid. Florida residents can qualify for Medicaid if they have income below the state limit, which is based on the number of people in your household, and if they meet at least one of the other qualifying circumstances. You can find the full details here.
The second option is to purchase insurance through the health insurance marketplace. Florida is one of 33 states that uses the federal marketplace, which you can access on Healthcare.gov. You can create an account by entering some basic information and to get an overview of the available plans. From there, you can complete your application and choose a health insurance plan. Here are eight do’s and don’ts to keep in mind as you shop for insurance.
People who purchase health insurance through the federal marketplace must do so during the annual open enrollment period unless they experience a qualifying event. The annual open enrollment period begins on November 1 of each year and ends on January 15 of the following year.
If you miss the open enrollment period but have a life event that affects your health insurance premium, you may qualify for a special enrollment period. Some of the life events that may qualify you include the following:
There are special provisions in place for people whose insurance or employment is affected by the COVID-19 pandemic.
Even if you are young and healthy, we do not recommend going without health coverage. While you might be in good health now, there is no way to predict what the future will bring. Considering the high cost of healthcare in the United States, even a relatively minor issue, such as appendicitis or a broken bone, could cost you tens of thousands of dollars.
It might be frustrating to pay a monthly premium for insurance but the alternative could be financially ruinous. We believe that budgeting for health insurance is a worthwhile endeavor when you compare it to the alternative.
Health insurance cost in the federal marketplace are given metal ratings that can help you understand what your out of pocket obligations will be, as well as telling you whether your monthly premium will be high or low. The categories are as follows:
As you might expect, platinum plans have the highest monthly premiums while bronze plans have the lowest premiums. You’ll need to weigh the monthly costs against the potential for higher out-of-pocket costs if you get sick or injured.
The issue of sticker shock is real, especially for people who are shopping for health insurance for the first time. The average monthly cost of health benefits for Floridians was $457 before subsidies in 2021. According to HealthInsurance.org, the 2022 premiums are predicted to see a 9% decrease, which is good news for people who need to buy health insurance.
When the Affordable Care Act was first signed into law, there was a penalty in place for people who did not purchase health insurance. That fee has since been revoked and there is no penalty if you don’t buy insurance. However, the reality is that you could face sticker shock if you don’t purchase a health plan, too. The cost of medical care when you pay entirely out of pocket is extremely high even if all you need are routine checkups, office visits and prescriptions. If you get seriously ill or injured, you could easily incur a bill that could bankrupt you.
The good news for many Floridians is that there are government subsidies in place to help you pay for health insurance if you meet the income thresholds and requirements. Depending on how much money you earn and whether you have a family to support, you may be able to save as much as 75% on your insurance.
For example, the 2019 average monthly premium for health insurance in the United States was $612 without subsidies and only $143 after subsidies. Even if you think you earn too much money to qualify for a subsidy, you should still go through the process to check because you might be surprised by financial help programs that are available.
Short-term health insurance exists for people who have a gap in their insurance coverage and need something to cover them until they get a new policy. Short-term plans tend to be less expensive than regular insurance on a monthly basis but they come with some significant and potentially discriminatory exclusions.
The Affordable Care Act put a set of standards in place for insurance companies. For example, they cannot discriminate against people who have pre-existing conditions, exclude preventive care or put an annual cap or a lifetime cap on benefits. Short-term health insurance policies can do any of these things because they are exempt from the ACA rules.
The only circumstance where we might suggest a short-term plan would be if you missed the open enrollment period and don’t qualify for a special enrollment period. If that’s the case, then you might want to consider a short-term policy to provide you with some protection if you get sick.
We already mentioned high deductible health plans (HDHP), but now let’s talk about some of the reasons you should consider one. People who don’t have serious health issues can benefit from a high deductible plan because the premiums can be significantly lower than they would be for a plan with a low deductible. You can save money on a monthly basis and, if you need only preventive care, you can pocket the money you save.
On a related note, people in their 20s can also consider a catastrophic plan, which covers only (you guessed it) catastrophic illnesses or injuries. We recommend being wary about such a plan because of life’s unpredictability. A high deductible plan represents a reasonable compromise.
As we said earlier, a high deductible plan is a plan with a minimum deductible of $1,400 for single people and $2,800 for family coverage. We suggest pairing your HDHP with a health savings account (HSA). You can put the money you save by choosing a high deductible plan into your HSA to cover your out-of-pocket medical expenses.
One of the most common mistakes people who get health care subsidies make is failing to track their income. As a freelancer, you’ll be asked to estimate your income to see if you qualify for a subsidy. If you do, you’ll get the subsidy when you file your quarterly taxes.
That said, if you earn more than you estimated, you may be required to repay some or all of your subsidy when you file your annual income tax return. For that reason, we recommend tracking your income. You may want to enlist the help of a tax professional to help you track your income as it relates to the subsidy, so you can adjust your quarterly payments as needed. That way, you can avoid surprises on Tax Day.
Being self-employed doesn’t mean you can’t get health insurance to protect you if you get ill or sustain an injury. The eight do’s and don’ts we’ve listed here can help you to navigate the healthcare marketplace and find affordable self-employed health insurance.
Are you considering a high deductible health plan? If the answer is yes, we recommend opening a Health Savings Account to help you save money to pay your out of pocket expenses. Click here to read about Addition Financial’s HSA and open an account today.