Finding health insurance is hard enough. Not only are there many plans to choose from, but the prices can be shocking once you realize how different it is to find health insurance as a freelancer versus an employee at a traditional 9 to 5 job.
There is a misconception that there won’t be any affordable options for health insurance, so it is easy to give up on the dream of becoming a freelancer because corporate jobs offer health insurance at an affordable price.
But, there are still ways to find health insurance as a freelancer so you do not have to go without coverage.
Managing cost expectations
The most important thing to remember is that employer insurance is set up differently than individual health insurance. At a company, both you and your employer share in the cost of the monthly premium. Your share is taken out of your paycheck, and the employer pays the rest, which is negotiated with the insurance company as a per-member group rate. This rate can change yearly so it is important to pay attention during Open Enrollment to make sure your benefits are up to date.
When you become a freelancer, things change. You now do not have an employer to pay part of your premiums–you are your own boss. Therefore, you essentially are paying the full rate for a plan. Because of this, it is important to budget for health insurance.
Affordable options
As a freelancer, you are limited to the options available in your state. However, there are many different options to choose from, including high and low-deductible plans and different carriers so you can compare rates.
ACA plan offered on the ACA marketplace or state exchange
These plans offer preventative care for free, and pre-existing conditions are not held against you to enroll.
One of the most valuable features of these plans is that you can get a subsidy based on your income to lower the cost.
Since income varies month to month as a freelancer, this can be a good option because you can report changes in your income as your business grows and the price of your health insurance will change as your income increases.
One thing to keep in mind with a marketplace plan is proof of income may be required to enroll, so it is important to keep income records and to work with an accountant to make sure the income you report on your application is as accurate as possible, or you will have to pay back your subsidy on your taxes at the end of the year.
Private plans
Private plans can be a good option if your income is uncertain and you do not want to have to risk paying a big tax bill, which would not be affordable.
These plans are not available in all states, so they may not work for you. Depending on cost, these plans can be 20-30% cheaper than a marketplace plan. However, there are no subsidies, so you are paying full price for the plan.
Another thing to consider about these plans is that they look into your health history to enroll, so if you have a pre-existing condition, you will not be able to enroll.
Tips to save money
There are two ways to save money on health insurance as a self-employed person.
First, health insurance is considered a business expense. This can be beneficial because the money you spend on it each year can be reported as a deduction on your taxes, which can help lower your overall tax bill for the year. Working with an accountant can make sure you are getting the right deductions.
Second, you can open a Health Savings Account (HSA). An HSA is a good option because you can set aside funds for medical bills, and the money you contribute is also a tax deduction at the end of the year. Also, if you have money left in your account at the end of the year, you can keep it for next year.
Currently, the contribution limits are $3850 for an individual and $7750 for a family for 2023.
Working with a licensed broker to get an HSA-compatible plan is best to make sure you can get the proper discounts and deductions.
While prices for individual plans are not the same as what they were at your employer, it is still important to have health insurance. Going without it can impact your finances and the business you are working hard to build.
Contact me today for a free consultation.