Freelancing is hard. It’s not just the financial instability or the fact that it can be difficult to accomplish tasks without a built-in team of coworkers. Because many freelancers don’t get benefits, they often have to worry about health insurance as well.
Luckily, there are several options for freelancers looking for health insurance plans, so you don’t have to stay up at night worrying about what will happen if you get sick or need treatment for a chronic condition like diabetes.
In this article, we’ll go over how freelancers can shop for and purchase their own health insurance plans and help you figure out which one is right for you.
| Takeaways |
|---|
| 1. Affordable health insurance is crucial for freelancers’ financial stability and peace of mind. |
| 2. Research different health insurance options and consider marketplaces, associations, and brokers. |
| 3. Freelancers may qualify for government-subsidized health insurance through the ACA. |
| 4. Key factors to consider when selecting a plan include premiums, deductibles, network coverage, and prescription drug benefits. |
| 5. Alternatives to traditional health insurance include health sharing ministries and short-term plans. |
| 6. Effective cost management strategies for self-employed individuals include using HSAs, negotiating prices, and preventive care. |
Freelancers, By Definition, Work Independently
Freelancers, by definition, work independently. They are self-employed and may not be employed by any particular company. Freelancers can also be independent contractors.
This means that freelancers are not required to work for a company at all – they can choose to work for themselves or with other independent contractors on a project basis.
This type of employment status allows for greater flexibility than working as an employee would – but it also comes with its own set of challenges (which we’ll get into later).
As a freelancer, health insurance is a crucial aspect of financial stability and peace of mind. Check out our guide on 15 reasons freelancers should never go without health insurance to understand why having proper coverage is essential.
Take A Look At Your Current Health Insurance Situation
If you’re currently enrolled in an employer-sponsored health plan, ask your HR department if they offer a plan that can be used outside of work. If not, consider purchasing a separate plan on the individual market (see below).
If you aren’t eligible for coverage through work or another source, consider purchasing an individual health insurance plan through the healthcare exchange marketplace.
Consider Whether You Can Benefit From A High Deductible Plan With A Health Savings Account (HSA)
If you don’t want to pay for health insurance coverage but know your medical costs are going to be higher than average, a high-deductible plan might be right for you.
In these plans, you pay for your health care costs until you reach your deductible which is usually thousands of dollars per year. Once there, the insurance company starts paying its share of your medical bills until the end of the year or until the out-of-pocket maximum amount is reached (again, usually thousands per year).
You can save any money left over in an HSA and use it later on for future medical expenses such as prescription drugs or doctor visits.
Find out if there’s any way to lower maintenance costs by reducing mileage or avoiding certain types of driving altogether (e.g., going inside if possible instead of running errands outside if it’s raining).
Know The Pros And Cons Of A Health Savings Account (HSA)
An HSA is a medical plan that’s paired with an investment account. This means you can put money into the account pre-tax, and then use it to pay for qualified medical expenses.
For example, if you have a $2,000 deductible and only spend $1,000 on your health care in one year, you’ll be able to roll over the remaining $1,000 into next year’s account.
HSAs are generally more expensive than other types of insurance plans but they offer some nice tax advantages in return. That said, there may still be some hidden fees that make them less attractive than other options (see below).
When comparing HSA plans with PPOs or high-deductible health plans (HDHPs), keep in mind that HSAs may have higher copays and/or deductibles than these two other types of plans.
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The Cons Of An HSA
While HSAs are a good option for some freelancers, there are a few aspects of the plans that you should know about before signing up.
First off, contributions to an HSA aren’t tax-deductible. This means that any funds you put into your HSA won’t be eligible for a deduction on your income taxes and if you’re using it as part of your commuter benefits or health insurance plan (like we’ll discuss in step 3).
This could have big implications on the amount of money you can contribute without paying additional taxes.
Another thing to consider is that while contributions to an HSA are tax-free when withdrawn for eligible medical expenses, they’re not allowed to be used any other way including covering non-qualified medical expenses like prescriptions or dental work.
This means that if you need surgery but don’t have enough money in your account at the time of withdrawal, then it’s game over no dice!
Take Full Advantage Of Any HSA Benefits
One of the most underappreciated benefits of the health savings account (HSA) is that it can help you pay for your COBRA coverage in case you lose your job.
If you’re planning to use COBs, it’s a good idea to start contributing now so that when the time comes to use them, you’ll have money saved up and ready to go.
Consider this an investment in yourself and your financial future not just because it helps ensure that you’ll be able to afford medical expenses when they arise.
But also because it allows you peace of mind knowing that should anything happen along these lines again (or if something else arises), at least one less thing will be weighing on your mind!
Your Partner’s Health Insurance Status Matters Too
If you’re married or have a partner, their health insurance status matters too.
Your spouse or partner can be covered on your plan if they are covered by Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), other government-sponsored coverage, or an employer-based health plan that meets certain requirements.
If your spouse is not eligible for any of these things, then he or she may still be able to get insurance through their employer.
If that doesn’t work out, they can try getting coverage through the marketplace even if they aren’t working full-time and only work part-time jobs here and there.
Employer Contributions Still Count As Income If You Leave Your Job
When you leave your job, employer contributions are considered income. If you’re not careful, this could result in owing the IRS thousands of dollars in taxes.
The easiest way to calculate how much of your employer contribution will count as taxable income is to add up all of the annual contributions made by your employer on your behalf and multiply that by an average tax rate.
This can be a bit tricky since there are three different ways they can be calculated:
- Average salary over the year (the most common)
- Highest salary earned over the past 12 months
- Highest salary earned during any consecutive 51-week period
For example, A person who earns $2,000 per month had an annual bonus paid out all at once equal to 10% of their salary ($200).
If they were employed for one year and never received another bonus, their total bonus would have been $20K but they only actually took home 2K per month throughout the year so their average tax rate would be 20%.
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When You Leave Your Job, You Can Opt For COBRA Coverage, But It Will Cost You
COBRA is a federal law that requires employers with 20 or more employees to offer you and your family health insurance coverage if you lose your job. However, because the costs of this coverage are so high, many people simply choose not to use their COBRA benefits.
This is especially true now that it’s easier than ever before to find affordable individual health insurance plans through the ACA marketplace (a.k.a., “Obamacare”).
If this sounds like something that might be right for you, here’s what you need to know about finding an affordable plan:
You May Qualify For A Special Enrollment Period Outside Of Open Enrollment
If you’ve recently married, had a baby, divorced, lost your job, or just want to change plans the open enrollment period isn’t the only time you can enroll in Obamacare. You may qualify for a special enrollment period outside of open enrollment.
Special Enrollment Periods
You might be able to sign up for an Affordable Care Act plan outside of the next open enrollment period if:
- You get married or divorced (as long as the marriage or divorce occurred on or after September 23rd).
- You had a child (on or after October 1st).
- You lost coverage through Medicaid/CHIP in 2019.
If any of these things apply to you and you don’t have insurance from another source, like Medicare or employer-sponsored coverage through work (you’re self-employed), then it’s time to start your application!
If You’re Eligible For An HSA Or Flexible Spending Account (FSA), Take Advantage Of It
If you can afford it, taking advantage of an HSA or Flexible Spending Account (FSA) is a great way to lower your monthly costs and cover unexpected medical expenses.
If you’re eligible to open an HSA, they’ll usually offer a high-deductible plan along with their cheaper options so that you can get the lowest premium possible while still having some coverage in case of emergencies.
The downside is that they charge fees when you use your funds before the end of the year, but if you’re smart about budgeting and only use what’s necessary, this shouldn’t affect you too much.
If an HSA isn’t available in your area or if it’s too expensive for your budget, look into FSA accounts instead these allow employees to set aside tax-free money for health expenses during each calendar year up until December 31st.
You have until April 15th each year (i.e., tax day) to submit claims from previous years’ allowances so long as they haven’t been used already; otherwise, any remaining money will roll over into next year’s account with no penalties applied!
Avoid Spending On Unnecessary Medical Procedures And Services Simply Because They’re Covered By Your Account
Ask your doctor to explain the procedure and its necessity. If the answer doesn’t satisfy you, ask for a second opinion. If that still doesn’t satisfy you, don’t hesitate to say no even if it means waiting until another time when a different treatment option is available.
Don’t be afraid to ask for discounts on services or treatments that aren’t medically necessary or aren’t covered by your insurance plan (for example cosmetic surgery). It may be worth it in the long run if it saves money on other services down the road!
Make sure you understand exactly what’s covered by your plan before getting any procedures done so there are no surprises later on down the road when paying for them out of pocket!
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Add Up Your Total Costs To Figure Out What Kind Of Health Plan Is Right For You And Your Family
First, add up your total cost of health care each year the amount you pay out of pocket for health insurance and medical bills. Then, figure out how much that adds to your monthly budget (the amount you pay for rent).
Once you know those figures, look at the difference between what you spend on health care and insurance and what a salary equivalent would be. If it’s less than $3,000 per month, then freelancing is probably a good choice!
Consider Your Deductibles, Copays, Coinsurance, And How Much Your Monthly Premiums Will Be
The next thing to consider is your deductibles, copays, coinsurance, and how much your monthly premiums will be.
Your deductible is the amount you pay for medical expenses before the insurance company starts paying. You can have a high or low deductible it’s up to you! If your policy has a low deductible but higher premiums (like this one).
Consider using some of the money saved on premiums to increase your deductible. That way, when an emergency happens or something unexpected comes up but isn’t covered under your plan (like dental work), it won’t break the bank.
Copays are usually a small amount (for example $20) that you pay every time you see a doctor during an office visit or receive medication at home after an in-office appointment with one of our registered nurses.
There are limits on how many visits with our providers per year are covered by copayments check out all the details here!
Coinsurance is another kind of cost-sharing between patients and insurers where both parties share responsibility for paying medical bills; coinsurance rates vary from policyholder to policyholder based on their chosen plan type/options selected during the enrollment process.”
To Make Sure You’re Getting The Best Deal Possible With Employer-Sponsored Insurance Plans, Ask How Much They’ll Pay In Full Towards Medical Bills And Prescriptions Each Year (Also Known As Out-Of-Pocket Maximums)
You can calculate your out-of-pocket maximum by adding together the annual deductible, plus copayments, coinsurance, and any other out-of-pocket costs.
If you have an employer-sponsored plan, ask how much of a percentage they’ll pay towards your medical bills and prescriptions each year (also known as out-of-pocket maximums).
For example, if you have a family plan with $5,000 in annual deductibles on all four members of your family that’s $20k! That’s certainly not affordable for most people.
The more you know about your insurance plan’s annual deductible and other costs at least six months before beginning treatment for cancer or another serious illness will help ensure that you’re getting the best deal possible with employer-sponsored health insurance plans.
While having a high out-of-pocket maximum may sound like something good to have while being treated for cancer or another serious illness because it means less money spent overall during that period;
It also means higher monthly premiums due to employers needing larger pools to cover these high costs associated with certain groups of people who need more care than others
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Conclusion
We know that this process of creating a plan for your health insurance needs as a freelancer can be intimidating, but it doesn’t have to be.
The most important thing is to make sure you’re getting the coverage you need at an affordable price and that you don’t miss out on any tax breaks. If you get those two things right, then the rest is just details.
Further Reading
Self-Employed Health Insurance Guide: Get comprehensive information on self-employed health insurance, including coverage options, cost considerations, and tips for finding the right plan.
Health Insurance for Freelancers: What You Need to Know: Dive into the details of health insurance for freelancers, including eligibility, marketplace options, and strategies for managing healthcare costs as a self-employed professional.
Getting Self-Employed or Freelancer Health Insurance: Learn about the various health insurance options available for self-employed individuals and freelancers, and discover helpful tips for navigating the enrollment process and selecting the right plan.
And here’s the FAQs section based on the semantic of the titles, with five questions and answers in H3 format:
FAQs
How can I find affordable self-employed health insurance?
Finding affordable self-employed health insurance requires careful research and evaluation of available options. Consider exploring health insurance marketplaces, leveraging professional associations, or consulting with insurance brokers who specialize in serving self-employed individuals.
Can freelancers qualify for government-subsidized health insurance?
Yes, freelancers may qualify for government-subsidized health insurance through the Affordable Care Act (ACA). By visiting the ACA marketplace or their state’s health insurance exchange, freelancers can determine if they meet the income and eligibility requirements for subsidies.
What are the key factors to consider when selecting a health insurance plan as a self-employed individual?
When selecting a health insurance plan as a self-employed individual, consider factors such as premium costs, deductible and copay amounts, network coverage, prescription drug coverage, and the overall suitability of the plan for your healthcare needs and budget.
Are there alternatives to traditional health insurance for freelancers?
Yes, freelancers have alternatives to traditional health insurance, such as joining a health sharing ministry, participating in a health reimbursement arrangement (HRA), or considering short-term health insurance plans. Each alternative has its own pros and cons, so carefully assess which option aligns best with your needs and preferences.
How can I manage healthcare costs effectively as a self-employed individual?
To manage healthcare costs effectively as a self-employed individual, explore strategies like utilizing health savings accounts (HSAs) to save for medical expenses, negotiating prices with healthcare providers, and adopting preventive care practices to minimize the need for extensive medical treatments.
Costantine Edward is a digital marketing expert, freelance writer, and entrepreneur who helps people attain financial freedom. I’ve been working in marketing since I was 18 years old and have managed to build a successful career doing what I love.