Newly Self-Employed? Options for Health Coverage

You're self-employed Now, what about health insurance?(Antonio Guillem/Shutterstock)

So you’ve decided to take that big step and work for yourself. Whether you’re a freelancer or a self-employed entrepreneur, there are exciting new challenges and opportunities.

The results of all your hard work now go into your pocket. But there are some expenses that you may not have had before. One is health insurance.

Regardless of age, it’s not a good idea to go without health insurance. A catastrophic event could wipe you out financially. Finding health insurance when you’re self-employed might seem like a challenge, but there are options.

Self-Employed vs Small Business Owner

A self-employed individual doesn’t work for someone else. Self-employed people can be sole proprietors, independent contractors, or in a partnership.

Small business owners, as opposed to individuals who are simply self-employed, have employees and are responsible for payroll taxes. In contrast, self-employed people are only responsible for their own taxes.

Self-employed people purchase health insurance only for themselves or their immediate family. As a self-employed individual, you can shop for plans directly with insurance companies. However, this may not always be the best—or most cost-effective—choice for your family. If you’re shopping for health insurance, there are other options.

Professional Organizations With Group Buying Power

Group health insurance generally offers better rates than individual health insurance (health insurance you buy on your own, not through an employer or association).

If you belong to a professional or trade organization, check to see if it offers group health insurance. Even if it doesn’t, it may be able to point you in the right direction. Here are a few organizations that offer group health insurance for their members.

With over 15,000 members, the Affiliated Workers Association (AWA) may be able to help. Its membership consists of independent contractors and other entrepreneurs. The AWA has group buying power.

Some plans you can purchase through the AWA include dental, prescription, accident, fixed indemnity, and vision.

Another organization that could help is the Freelancers Union. This group represents freelancers throughout the United States. From catastrophic plans to Medicare Advantage Plans, a self-employed individual has different levels of plans available through the Freelancers Union.

The Association for Computing Machinery (ACM) consists of technology professionals. Its members include coders, database engineers, and developers, as well as researchers, educators, and other professionals.

An ACM membership gives you access to health insurance products such as major medical, dental, short-term medical, prescription drug plans, and Medicare supplements.

There are many more professional and trade groups. Contact your organization and see what they have to offer.

Health Care Sharing Plans

Although not insurance, health care sharing plans are organizations whose members share health care costs. If you join a health care sharing plan, you will pay a “share amount” each month. This is like an insurance premium. You will also have a yearly “unshared amount.” This is comparable to an insurance deductible—your medical expenses must exceed this amount before your health share plan covers your expenses.

Many health care sharing plans, like MediShare, are faith-based. But you can find some that are non-denominational.

The downside to these plans is that many will not take pre-existing conditions. Because of this, a health care sharing plan may be a better option for a younger, healthy family.

As part of a health sharing plan, you must usually pay health care providers up front and then submit your claims to be reimbursed by the sharing plan.

Direct Primary Care

Direct primary care is an arrangement under which patients pay a monthly, quarterly, or annual fee to a health care provider. In return, they receive regular consultations or visits and some basic lab work.

Health care providers who offer direct primary care generally don’t accept insurance.

If you opt for direct primary care, you still should carry a high deductible insurance policy to cover emergencies or anything catastrophic that requires hospitalization.  However, you won’t need a high-cost policy to cover your routine doctor appointments.

Many direct primary care providers dispense generic prescriptions in-house or contract with pharmacies to offer generic medications at wholesale prices.

Don’t confuse direct primary care with concierge medicine. Both models include a periodic membership fee. However, concierge providers also bill insurance for their services, so you will also pay for standard health insurance.  If you opt for concierge medicine, you will have easier access to your doctor as well as longer appointments, but it can end up costing you thousands of dollars over and above insurance costs.

Health Insurance Marketplace®

The Health Insurance Marketplace®  is a viable option for the self-employed.

If you fill out a Marketplace application, you will be required to give your estimated income for the upcoming coverage year.

When you fill out your application, you can find out if you qualify for the advanced premium tax credit, or a cost-sharing reduction. These discounts are based on your income and household size. If you don’t think you’re eligible for a discount, you will still need to supply your estimated income.

You can purchase insurance through either federal or state Marketplace websites, if applicable.

Be aware that many Marketplace plans have high deductibles, which could mean thousands of dollars out of pocket even if you are approved for a discounted premium.

COBRA

The Consolidated Omnibus Budget Reconciliation Act (COBRA) extends health insurance coverage to individuals if they leave their jobs (pdf). This extension must be offered by businesses that have 20 or more employees.

You must have been enrolled in your employer’s health insurance plan to be eligible for COBRA.  You must also have had a qualifying event, like a job loss.

An employer is required by federal law to notify you of your eligibility to receive COBRA. COBRA coverages can extend from 18 months to 36 months, depending on the circumstances.

Coverages offered under COBRA must be identical to those you had when employed. You are entitled to the same services, benefits and choices you previously had.

Health Insurance as a Tax Deduction

You might get a bit of a break with the IRS if you are self-employed and paying for health insurance for yourself and your family. Under these circumstances, if you had a net profit for the year, you might be eligible for the self-employed health insurance deduction.

This isn’t an itemized deduction.  Rather, it’s an adjustment to income for premiums paid during the tax year.

Conclusion

If you’re self-employed, you’re not out in the cold when it comes to health insurance.

There are choices available. If you’re newly self-employed, the short-term fix may be COBRA. But check into trade and professional organizations with their group buying power.  Federal and state Health Insurance Marketplace® exchanges are viable options as well. Finally, health care sharing plans or direct primary arrangements may work well for you and your family.

The Epoch Times Copyright © 2022 The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.