The Definitive Guide to Health Insurance for Freelancers
Freelancing is a great way to make a living. It allows you to work from anywhere at your own pace. Even better, it enables you to work full-time without having to worry about a boss breathing down your neck (but sometimes clients takeover that duty).
But when it comes to being self-employed, there’s always one glaring question: how do you get health insurance?
After all, when you’re not a full-time employee for a specific company, you don’t have access to benefits. So, how do you branch off and work for yourself while still making sure that you can go to the doctor’s office or hospital when you need care?
Well, we’ve compiled this definitive guide to answer all of those questions and more.
What’s the Definition of a Freelancer?
Before we move forward in discussing freelancer health insurance, it helps to understand exactly what we mean when we talk about “freelancing.”
Essentially, a freelancer (aka self-employed workers or independent contractors) are people who don’t work for one specific company. Instead, they make their living by taking on contracts with one or more different companies.
Self-employed workers are not hired as long-term employees. Typically, they work less than 40 hours per week for each of their clients.
In other words, they’re kind of like part-time workers who aren’t official employees of the company. Self-employed individuals are independent workers, so they are in charge of filing their own taxes. The company does not withhold taxes from their paycheck like they do with other employees.
People work as independent contractors in almost every field imaginable from design and engineering to video game journalism, business consulting, and accounting. Most gig-economy workers are considered independent contractors. That includes jobs like driving for Uber or Lyft, walking dogs on Rover, and many others.
Many people enjoy this type of work because of the freedom it offers. But, freelancers have the opportunity to make a decent living, too. According to research from the online payment platform Payoneer, the average independent worker makes around $19 per hour.
And Glassdoor, the popular job search platform, says that the average independent contractor makes roughly $44,000 per year. This annual salary, Business News Daily points out, is significantly higher than that of a typical nine-to-fiver.
Of course, there’s always the question of health insurance. If you plan to work as a contractor, you need to allocate a certain amount of your income toward healthcare.
Do I Actually Need Health Insurance?
Everyone needs a healthcare plan. A health plan is a necessity, not a luxury. After all, everyone gets sick or injured at some point. It’s important to have coverage to offset the cost of treatment.
It’s unfortunate to say, but you never know when something could happen. Illnesses, infections, diseases, and injuries can occur at any point in your life. So, you want to make sure that you have proper coverage so that you’re prepared for the day when you need it.
Unlike some countries, Americans do not have the luxury of free healthcare. If you walk into a hospital and receive treatment without coverage, the hospital will bill the medical costs to you directly. Then, you’ll be responsible for paying that bill over the next few years.
Hospital bills are notoriously outrageous. A single surgery accompanied by a few days of recovery can cost hundreds of thousands of dollars. Obviously, a typical freelancer doesn’t have that kind of dough, so do yourself a favor and get some coverage.
Plus, you’re legally required to have health insurance at the moment. Under the current federal healthcare laws, all US citizens are required to have some kind of coverage.
Note: Starting with the 2019 plan year (for which you’ll file taxes in April 2020), the fee no longer applies. If you don’t have coverage during 2019 or later, you don’t need an exemption in order to avoid the penalty.
If you can afford insurance but forego purchasing it, you’ll have to pay a fee on your taxes. This is known as the Shared Responsibility Provision.
Currently, the SRP tax penalty is $695 for each adult in your family without coverage and $348 for each child in your family without it. So, although the Shared Responsibility Program is void at the end of 2018, going without insurance could cost you a lot of money on your upcoming tax payments.
Ultimately, healthcare coverage is crucial, particularly if you have children. If you’re planning on working as a self-employed contractor, make sure that you have it.
Health Insurance Option #1: Get It Through Your State
Every state offers some form of state-funded healthcare. Programs like Medicare allow disabled people, unemployed folks, low-income families, and self-employed workers to get coverage through the state. For some people, this coverage is offered for free or at a discounted rate.
The exact cost varies from state to state. States like Iowa, North Dakota, Hawaii, and Massachusetts, to name a few examples, all have a reputation for providing very affordable healthcare plans.
Alaska, Louisiana, and the Carolinas, on the other hand, don’t have the most affordable options. But, they do still offer plans. So, if you have no other way to get coverage, this could be your best bet.
Ultimately, the exact cost of state healthcare is determined by your household income and the number of dependents in your family. So, the less you make and the more people you’re responsible for taking care of, the cheaper, per person, your health insurance plan will be.
Health Insurance Option #2: Get It Through The Freelancers Union
The Freelancers Union is a non-profit organization that advocates for self-employed workers. They hold regular meetings every month in which they discuss ever-changing labor laws and distribute relevant information to attendees.
They also help to connect independent contractors with valuable resources like healthcare plans.
Although the FU isn’t exactly a traditional labor union (they have no real pull in the outcome of a worker’s career), they are able to connect self-employed people with affordable coverage.
If you want to sign up through the Union, you can head to their website and fill out a short application form. You’ll have to enter some basic info like your name, DOB, zip code, estimated income, and email.
Once you fill out the app, the Union will send you a list of healthcare plans that might work for you. This list is comprised entirely of plans provided by their “partner” insurers. Essentially, these are providers that work with FU to offer affordable care for self-employed people.
Unfortunately, “affordable” is somewhat vague here. The exact prices vary from area to area. If there happens to be an affordable provider who works in your region, the FU might be a good option.
In the past, the Union was a popular healthcare provider for independent contractors. In other words, contractors actually paid FU directly for their healthcare. But, they eliminated this feature of their program when the Affordable Care Act (aka Obamacare) was passed.
These days, it seems a bit more like an aggregate search engine, or affiliate marketing program, for other providers. It seems like most of their partners offer slightly discounted (if that) insurance plans.
This is always an option, but it could end up costing you just as much as a private plan. As one Redditor says in a post about the topic:
“You could try [to get coverage] with the Freelancers Union but they’re just as expensive [as private coverage].”
Health Insurance Option #3: Get it Through Your Spouse’s Employer
Honestly, this could be the best-case scenario for an independent contractor who needs health coverage. If you’re married to someone who gets good benefits through their employer, you’ve essentially hit the jackpot.
Most employers, after all, offer a family plan that covers the employee and their spouse, children, or other dependents. Typically, the employee must be a full-time worker to qualify for family coverage.
In almost every case, a family plan costs slightly more than an individual plan. But, some companies allow employers to add a few family members to their plan for free.
Every company handles employee benefits differently. So, to add you to their coverage plan, your spouse will need to speak with the appropriate department. If they work at a large company, they’ll probably have to talk to HR. If they work for a smaller company, they may have to ask the CEO or manager directly. Ultimately, someone should be able to point them in the right direction.
Usually, employees have to wait for an open enrollment period (OEP) to add family members to their plan. An OEP is a specific time slot (usually several months) during which insurers accept new clients.
If you’ve just recently gotten married, though, you’re in luck. Marriage (as well as other life-changing events like the birth of a child) counts as a qualifying life event. This means that they can probably sign you up right away and you’ll have insurance within a few days.
Unfortunately, if you’ve been married for a while and you’re just now trying to get on your spouse’s plan, you may have to wait for the next open enrollment period.
But, once you’re covered, you’re good to go! As long as your spouse keeps their job, you’ll have your medical and dental needs taken care of.
Health Insurance Option #4: Call the Local Chamber of Commerce
In many cities and states, local business organizations work to help independent contractors get a healthcare plan. Many Chamber of Commerce organizations, for example, offer coverage.
Typically, you have to become a member of the group before you’re eligible to enroll in a plan. Many Chambers will require that you have a business license to join.
You can find a list of small business organizations around the country (and learn more about the benefits they offer) at Entrepreneur.com.
In most cases, you’ll have to pay a $30-$40 fee to join the group. But, in our opinion, the fee is well worth it. Not only does membership grant you access to affordable insurance, but can also help you to connect with other small business owners in the area (through networking events, etc.).
Ultimately, joining the local Chamber of Commerce is a great way to meet potential clients. If you offer a service that your fellow members need, you could bring in a steady flow of business and get healthcare while you’re at it!
Health Insurance Option #5: Go for a Private Plan
It’s unlikely that you’ll want to take this route. But if you really have to, you can always enroll in a private insurance plan, this means that you’ll go directly to an insurance company (as opposed to using the government marketplace).
This is usually a last-ditch effort for people who make too much money to qualify for state health insurance or a local Chamber of Commerce plan.
When you enroll in private insurance, you’ll have a number of different options to choose from. The more coverage you want, the more it’s going to cost you.
For example, a low-coverage plan (which basically covers the bare minimum) may run as much as $1,000 a month for four people. For a single person, a low-coverage plan costs around $440 on average.
In addition to high monthly costs, bare-minimum plans are usually compounded by high deductibles. In other words, opting for a cheap, low-coverage plan usually means that you’ll receive a hefty bill every time you go to the doctor.
Although it won’t be as high as it would if you had no coverage at all, you could still be looking at a bill of at least $1,000 every time you set foot in the hospital or doctors office.
Obviously, this is far too much money for most of us. So, we recommend that you avoid a private plan unless you have no other options.
Freelancers Don’t Have to Go Without Healthcare
Health insurance is one of the biggest factors that prohibit people from going to work for themselves. After all, it’s easy to stay employed at someone else’s company just because they offer coverage.
So, if you truly want to set off on your own, then use one of the resources outlined above. Healthcare costs are increasing every year, and you don’t want to be stuck with out-of-pocket medical bills because you don’t have an insurance policy.
By selecting one of the above options, you will have some protection from medical expenses. Sure, you’ll still have to pay a monthly premium, but in the unfortunate event that you become sick or injured, you’ll probably save a lot of money in the long run.
When searching for affordable health insurance, we suggest first looking at the health insurance marketplace (Obamacare). Depending on your monthly income and location, they might have affordable coverage options.
If not, there are other alternatives. Regardless of what you choose, remember that being covered is important for any freelancer.