Congratulations! You’ve taken the plunge from a 9 to 5 to self-employment but, not so fast. You still need to figure out how to offset the costs associated with providing your own health benefits now that you’re your own employer. We have some strategies to offer that can help you figure out what the best way is to insure yourself.
So, What Is a Freelancer or Independent Contractor?
A freelance worker, independent worker, or self-employed person is someone who does business on their own and does not work for any one company. As a freelancer or self-employed worker, people enjoy many benefits and flexibility, as well as work-life balance, but also have to manage all aspects of their work themselves. Health care coverage is one important consideration when you decide to become a freelance worker, or are self-employed.
How Much Does Health Insurance Cost for Freelancers?
Although it would be great to be able to give one number to answer this question, everyone's health insurance rate will vary. However, before you worry about how much health insurance costs, consider that in 2017, according to Department of Health and Human Services the average American with a federal marketplace plan paid $106 a month after subsidies. In addition to the marketplace, you also have other options to find affordable health insurance.
We have some strategies to offer that can help you figure out what the best way is to ensure yourself and options of where you can turn to find health insurance as a freelance worker.
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Options:
The Freelancers Union, which offers a health insurance plan, as well as supplemental medical plans like dental, or other insurance plans like life insurance.
If you’re recently unemployed, newly independently employed left your job or are about to leave your regular employment to venture out on your own as a self-employed or freelance worker, most health insurance plans offer the option when leaving a job to convert your existing group plan into an individual plan.
Individual plans may be more expensive depending on your personal circumstance, but the costs you might save in working for yourself may easily cover the difference. If you are leaving your job, you also may qualify for the special enrollment period that we explain below. Be sure and check your options there to make sure you save money wherever possible.
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Since the advent of Obamacare or the Affordable Care Act, you can find health insurance through the healthcare marketplace either as an individual or in some circumstances as a small business. Most freelancers won't be in the small business category, but here's the link, just in case it applies to you either now, or if your business grows.
Your spouse or domestic partner’s health insurance is an option for covering your health needs as it can cut down costs in the long term. Even if you are not legally married, you may qualify as a domestic partner if you share the same home and live a domestic life together, as long as you are not married to anyone else. You can learn more about who qualifies as a domestic partner here.
Your local chamber of commerce, professional association or business groups are all great resources for finding out information about affordable insurance. If your profession has associations, or if you become a member of a self-employed worker or independent worker association, you may be able to get group insurance through these kinds of memberships. The group insurance allows individuals to band together as members of a group of self-employed workers giving a similar effect to the kind of group insurance you would get through an employer.
What to Do If You Missed Open Enrollment and Need Health Insurance
If you missed open enrollment, you can visit themarketplace and see if you qualify for a special enrollment. Life changes and circumstances make it possible for you to qualify outside the open enrollment period for health insurance. You can also get healthcare if you qualify for Medicaid or CHIP. You can learn more about this and see if you qualify for health Insurance enrollment outside of the open enrollment period here.
Do You Have to Have Health Insurance If You're a Freelancer?
If you can afford health insurance, then you must buy your own health insurance under the Affordable Care Act. Even self-employed or freelance workers need to have the "minimal essential coverage" health insurance.
How Tax Credits for Freelance Workers and Health Insurance Costs Work
Subsidies and tax credits can help make your health care costs affordable. You may also be able to get an advance tax credit. In a Department of Health and Human Services Report from March 2016: "The average advance premium tax credit covers about 73 percent of the gross premium for individuals who qualify for an average advance premium tax credit."
The Penalty for Not Having Health Insurance Is Not Worth It
If you can afford health insurance and don't qualify for an exemption, then you will have a penalty to pay known as the individual mandate penalty. The penalty is payable when you file the taxes for the year you did not have health care. The amount of the fee depends on your personal situation and can end up being quite costly. It is based on the greater of the following:
- 2.5 percent of your household income
- Total yearly fee of a bronze plan health insurance
- $695 per adult, $347.50 per child under 18 to a maximum of $2,085 in 2016/2017
So, although paying for health insurance when you are a freelancer may seem difficult to budget for, you may end up paying more long term if you don't sign up for a plan.
Cutting Health Insurance Costs
If you find the plan prices expensive, then consider taking a higher deductible plan, or choose a lower "metal-level" in the marketplace. Again, consider having a discussion with a health insurance broker who represents several insurance companies and can search various options for you. The more you shop for your health insurance, the more likely you are to save money. Shopping in only one place will limit your possibilities.
Hopefully, the above helps clarify some of the confusion that can come along with adjusting to a new life as a freelancer. Now, go out there and get covered!
Jasmine Browley holds an MA in journalism from Columbia College Chicago, and has contributed to Ebony, Jet and MADE Magazine among others. So, clearly, she knows some stuff. Follow her digital journey @JasmineBrowley.
